S-4/A

    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 2, 2001


                                                      REGISTRATION NO. 333-69122
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                           -------------------------


                                AMENDMENT NO. 2

                                       TO

                                    FORM S-4
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                           -------------------------

                    SALEM COMMUNICATIONS HOLDING CORPORATION
                             AND OTHER REGISTRANTS*
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                                                                
             DELAWARE                             4832                            52-2253737
   (STATE OR OTHER JURISDICTION       (PRIMARY STANDARD INDUSTRIAL             (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION)     CLASSIFICATION CODE NUMBER)            IDENTIFICATION NO.)



                              4880 SANTA ROSA ROAD
                                   SUITE 300
                          CAMARILLO, CALIFORNIA 93012
                                 (805) 987-0400
              (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
  INCLUDING AREA CODE, OF REGISTRANT'S AND CO-REGISTRANT'S PRINCIPAL EXECUTIVE
                                    OFFICES)
                            ------------------------

                            JONATHAN L. BLOCK, ESQ.
                    SALEM COMMUNICATIONS HOLDING CORPORATION
                              4880 SANTA ROSA ROAD
                                   SUITE 300
                          CAMARILLO, CALIFORNIA 93012
                                 (805) 987-0400
 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)

                                WITH A COPY TO:

                             THOMAS D. MAGILL, ESQ.
                          GIBSON, DUNN & CRUTCHER LLP
                            4 PARK PLAZA, SUITE 1400
                            IRVINE, CALIFORNIA 92614
                            ------------------------

          APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
  As soon as practicable after this Registration Statement becomes effective.

     If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.  [ ]

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

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

     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
                                                        (Continued on next page)


                               *OTHER REGISTRANTS

     Salem Communications Corporation and each of its subsidiaries (other than
Salem Communications Holding Corporation), and each other subsidiary that is or
becomes a guarantor of the securities registered hereby, is hereby deemed to be
a registrant.



-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
      EXACT NAME OF REGISTRANT       STATE OR OTHER JURISDICTION OF PRIMARY STANDARD INDUSTRIAL        I.R.S. EMPLOYER
    AS SPECIFIED IN ITS CHARTER      INCORPORATION OR ORGANIZATION  CLASSIFICATION CODE NUMBERS     IDENTIFICATION NUMBER
-----------------------------------------------------------------------------------------------------------------------------
                                                                                        
Salem Communications Corporation....           Delaware                         4832                      77-0121400
ATEP Radio, Inc. ...................          California                        4832                      77-0132973
Bison Media, Inc. ..................           Colorado                         4832                      77-0434654
Caron Broadcasting, Inc. ...........             Ohio                           4832                      77-0439370
CCM Communications, Inc. ...........           Tennessee                        2721                      95-3394730
Common Ground Broadcasting, Inc. ...            Oregon                          4832                      93-1079989
Golden Gate Broadcasting Company,
  Inc. .............................          California                        4832                      94-3082936
Inland Radio, Inc. .................          California                        4832                      77-0114987
Inspiration Media of Pennsylvania,
  L.P. .............................         Pennsylvania                       4832                      52-2295353
Inspiration Media of Texas, LLC.....             Texas                          4832                      75-2615876
Inspiration Media, Inc. ............          Washington                        4832                      77-0132974
Kingdom Direct, Inc. ...............          California                        2761                      77-0121400
New England Continental Media,
  Inc. .............................         Massachusetts                      4832                      04-2625658
New Inspiration Broadcasting
  Company, Inc. ....................          California                        4832                      95-3356921
OnePlace, LLC.......................           Delaware                         4899                      52-2141739
Pennsylvania Media Associates,
  Inc. .............................         Pennsylvania                       4832                      94-3134636
Radio 1210, Inc. ...................          California                        4832                      77-0052616
Reach Satellite Network, Inc. ......           Tennessee                        4832                      62-1499223
Salem Communications Acquisition
  Corporation.......................           Delaware                         4832                      52-2251145
Salem Media Corporation.............           New York                         4832                      95-3482072
Salem Media of Colorado, Inc. ......           Colorado                         4832                      84-1239646
Salem Media of Georgia, Inc. .......           Delaware                         4832                      52-2194729
Salem Media of Hawaii, Inc. ........           Delaware                         4832                      91-1973005
Salem Media of Illinois, LLC........           Delaware                         4832                      52-2295222
Salem Media of Kentucky, Inc. ......           Kentucky                         4832                      61-1346985
Salem Media of New York, LLC........           Delaware                         4832                      52-2293254
Salem Media of Ohio, Inc. ..........             Ohio                           4832                      95-3690954
Salem Media of Oregon, Inc. ........            Oregon                          4832                      77-0114986
Salem Media of Pennsylvania,
  Inc. .............................         Pennsylvania                       4832                      77-0237182
Salem Media of Texas, Inc. .........             Texas                          4832                      77-0379125
Salem Media of Virginia, Inc. ......           Virginia                         4832                      54-1927897
Salem Music Network, Inc. ..........             Texas                          4899                      77-0434655
Salem Radio Network Incorporated....           Delaware                         4899                      77-0305542
Salem Radio Operations-Pennsylvania,
  Inc. .............................           Delaware                         4832                      52-2295223
Salem Radio Operations, LLC.........           Delaware                         4832                      77-0581097
Salem Radio Properties, Inc. .......           Delaware                         6531                      52-2194731
Salem Radio Representatives,
  Inc. .............................             Texas                          4899                      77-0281576
SCA License Corporation.............           Delaware                         4832                      52-2255733
South Texas Broadcasting, Inc. .....             Texas                          4832                      77-0388924
SRN News Network, Inc. .............             Texas                          4899                      77-0426090
Vista Broadcasting, Inc. ...........          California                        4832                      77-0389639
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------


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PROSPECTUS

                                  $150,000,000

                                  SALEM(TM) LOGO

                    SALEM COMMUNICATIONS HOLDING CORPORATION
                           -------------------------

                               OFFER TO EXCHANGE
                 9% Senior Subordinated Exchange Notes Due 2011
          Which Have Been Registered Under the Securities Act of 1933
                                      For
                         Any and All of the Outstanding
                     9% Senior Subordinated Notes Due 2011
             (CUSIP Nos. 79409P AA 3, 79409P AB 1, and U8639B AA 2)
                           -------------------------

     Salem Communications Holding Corporation is offering to exchange up to
$150,000,000 aggregate principal amount of its 9% Series B Senior Subordinated
Notes due 2011 which have been registered under the Securities Act of 1933, as
amended, for a like amount of any and all of its outstanding 9% Series A Senior
Subordinated Notes due 2011 issued on June 25, 2001, from the holders thereof.
Salem Holding does not intend to list the exchange notes on any securities
exchange.

THE EXCHANGE OFFER EXPIRES AT 5:00 P.M., NEW YORK CITY TIME, ON             ,
2001, UNLESS EXTENDED.

   FOR A DISCUSSION OF RISKS THAT SHOULD BE CONSIDERED BY HOLDERS IN DECIDING
                               WHETHER TO TENDER
    OLD NOTES IN THE EXCHANGE OFFER SEE "RISK FACTORS" BEGINNING ON PAGE 11.

     NONE OF THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES
COMMISSION OR ANY OTHER REGULATORY AGENCY HAS APPROVED OR DISAPPROVED OF THE
NOTES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
                           -------------------------

     THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL SALEM HOLDING ACCEPT
SURRENDER FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.

               THE DATE OF THIS PROSPECTUS IS             , 2001.


                      [This page intentionally left blank]


     You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized any person to provide you
with any information or represent anything no contained in this prospectus, and
if given or made, any such information or representation should not be relied
upon as having been authorized by us.

                               TABLE OF CONTENTS



                                                              PAGE
                                                              ----
                                                           
MARKET DATA SOURCES.........................................     i
FORWARD-LOOKING STATEMENTS..................................    ii
PROSPECTUS SUMMARY..........................................     1
RISK FACTORS................................................    11
THE EXCHANGE OFFER..........................................    21
USE OF PROCEEDS.............................................    29
CAPITALIZATION..............................................    29
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA..............    30
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
  STATEMENTS OF SALEM HOLDING...............................    33
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
  STATEMENTS OF PARENT......................................    41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
  AND RESULTS OF OPERATIONS.................................    47
BUSINESS....................................................    60
MANAGEMENT..................................................    82
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
  MANAGEMENT................................................    88
RELATED PARTY TRANSACTIONS..................................    90
DESCRIPTION OF EXISTING INDEBTEDNESS........................    93
DESCRIPTION OF THE NOTES....................................    95
EXCHANGE OFFER; REGISTRATION RIGHTS.........................   132
BOOK-ENTRY; DELIVERY AND FORM...............................   134
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS............   136
PLAN OF DISTRIBUTION........................................   141
LEGAL MATTERS...............................................   141
EXPERTS.....................................................   141
AVAILABLE INFORMATION AND INCORPORATION BY REFERENCE........   142


                              MARKET DATA SOURCES

     The market data included in this prospectus, including information relating
to our relative position in the industry, is based on internal surveys, market
research, publicly available information and industry publications. Although we
believe that such independent sources are reliable, we have not independently
verified the information contained in them, and we cannot guarantee the accuracy
or completeness of this information.

     All metropolitan statistical area ("MSA") rank information used in this
prospectus is from the Spring 2001 Radio Market Survey Schedule & Population
Rankings published by The Arbitron Company, excluding the Commonwealth of Puerto
Rico. According to the Radio Market Survey, the population estimates used were
based upon 1990 U.S. Bureau Census estimates updated and projected to January
2001 by Market Statistics, based on the data from Sales & Marketing Management's
1999 "Survey of Buying Power."

                                        i


                           FORWARD-LOOKING STATEMENTS

     This prospectus contains forward-looking statements that are subject to
risks and uncertainties. You should not place undue reliance on these
statements. Forward-looking statements include information concerning our
possible or assumed future results of operations, including descriptions of our
business strategies. These statements often include words such as "believe,"
"expect," "anticipate," "intend," "plan," "estimate," "seek," "will," "may" or
similar expressions. These statements are based on certain assumptions that we
have made in light of our experience as well as our perceptions of historical
trends, current conditions, expected future developments and other factors we
believe are appropriate in these circumstances. As you read and consider this
prospectus, you should understand that these statements are not guarantees of
performance or results. They involve risks, uncertainties and assumptions. Many
factors could affect actual financial results or results of operations and could
cause actual results to differ materially from those in the forward-looking
statements. These factors include but are not limited to:

     - operations and prospects,

     - acquisition and integration of new radio stations,

     - business and financing plans,

     - funding needs and financing sources,

     - future growth of the religious and family issues format segment of the
       radio broadcasting industry,

     - characteristics of competition,

     - actions of third parties such as government regulatory agencies, and

     - various other factors beyond our control.

     All future written and oral forward-looking statements by us or persons
acting on our behalf are expressly qualified in their entirety by the cautionary
statements contained in this prospectus or referred to above. We do not have any
obligation or intention to release publicly any revisions to any forward-looking
statements to reflect events or circumstances in the future or to reflect the
occurrence of unanticipated events. YOU SHOULD READ CAREFULLY THE FACTORS
DESCRIBED IN THE "RISK FACTORS" SECTION OF THIS PROSPECTUS FOR A DESCRIPTION OF
CERTAIN RISKS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER FROM THESE
FORWARD-LOOKING STATEMENTS.

                                        ii


                               PROSPECTUS SUMMARY

     This is only a summary of the prospectus. You should read the entire
prospectus, including the financial data and related notes, before making an
investment decision. Financial information of Salem Communications Corporation
presented or referenced to in this prospectus includes that of its consolidated
subsidiaries. Unless the context indicates otherwise, all references to "we,"
"our," "ours' and "us" refer to Salem Communications Corporation and its
consolidated subsidiaries, including Salem Holding. All references to "Salem
Holding" are to Salem Communications Holding Corporation, a wholly-owned
subsidiary of Salem Communications Corporation and the issuer of the exchange
notes offered hereby. The description of our business assumes completion of all
pending transactions.

     Salem Communications Corporation and all of its direct and indirect
subsidiaries (other than Salem Holding) on the issue date will be guarantors of
the exchange notes offered hereby and Salem Holding's existing 9 1/2% notes.

                                  THE COMPANY


     We believe that we are the largest U.S. radio broadcasting company,
measured by number of stations and audience coverage, providing programming
targeted at audiences interested in religious and family issues. Our core
business is the ownership and operation of radio stations in large metropolitan
markets. We own and operate 81 radio stations, including 56 stations in 22 of
the top 25 markets. This makes us the eighth largest operator measured by number
of stations overall and the third largest operator measured by number of
stations in the top 25 markets. In addition, management believes that we are the
seventeenth largest radio broadcaster measured by net broadcasting revenues for
the year ended December 31, 2000. We also own Salem Radio Network(R), which we
believe to be a leading developer, producer and syndicator of religious and
family issues oriented talk, news and music, but not of general broadcast
programming, with over 1,600 affiliated radio stations. In addition, we own
complementary Internet and publishing businesses.


     Our business strategy is to expand and improve our national radio platform
in order to deliver compelling content to audiences interested in religious and
family issues. We primarily program our stations with our Christian teaching and
talk format which is talk programming with religious and family themes. We also
feature conservative news/talk and contemporary Christian music formats. Salem
Radio Network(R) supports our strategy by enabling us to offer a variety of
program content on our radio stations.

     Both our chief executive officer and our chairman are career radio
broadcasters who have owned and operated radio stations for over 25 years. Our
management team has successfully executed a strategy of identifying, acquiring
and operating radio stations.
                           -------------------------

     Our principal executive offices are located at 4880 Santa Rosa Road, Suite
300, Camarillo, California 93012, and our telephone number is (805) 987-0400.

                                        1


                            ORGANIZATIONAL STRUCTURE

     Salem Communications Corporation was formed in 1986 as a California
corporation and was reincorporated in Delaware in 1999. Salem Holding was formed
as a wholly-owned subsidiary of Salem Communications Corporation in May 2000. In
May 2000, Salem Communications Corporation formed an additional wholly-owned
subsidiary, Salem Communications Acquisition Corporation, which has since
acquired nine radio stations through its wholly-owned subsidiary SCA License
Corporation. In August 2000, Salem Communications Corporation assigned
substantially all of its assets and liabilities (other than stock of Salem
Holding and Salem Communications Acquisition Corporation) to Salem Holding.

     On June 15, 2001, Salem Holding effected a dividend to Salem Communications
Corporation of Salem Holding's publishing and Internet businesses. This
transaction was effected as a dividend of the capital stock and membership
interests, respectively, of Salem Holding's wholly-owned subsidiaries CCM
Communications, Inc. and OnePlace, LLC. As a result, CCM and OnePlace became
direct subsidiaries of Salem Communications Corporation. CCM and OnePlace
continue to be guarantors of borrowings under Salem Holding's credit facility
and of Salem Holding's existing 9 1/2% notes. Salem Communications Corporation
and all of its subsidiaries (other than Salem Holding) are guarantors of the
borrowings under Salem Holding's credit facility, Salem Holding's existing
9 1/2% notes and the old notes; and will be guarantors of the exchange notes
offered hereby.

     The chart below sets forth our organizational structure.

                        (Organizational Structure Chart)

                                        2


         SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA OF SALEM HOLDING

    The following table presents summary historical, pro forma and other
financial data of Salem Holding, the issuer of the notes offered hereby, and its
consolidated subsidiaries. The following summary historical financial data as of
and for the three years ended December 31, 2000 have been derived from Salem
Communications Corporation's audited consolidated financial statements (see also
Note 12 thereto with respect to Salem Holding). The summary historical financial
data as of and for the six months ended June 30, 2000 and 2001 have been derived
from Salem Communications Corporation's unaudited condensed consolidated
financial statements (see also Note 12 thereto with respect to Salem Holding),
which financial statements include all adjustments, consisting only of normal
recurring adjustments, which are, in our opinion, necessary for a fair
presentation of the results of operations for such periods. The results of
operations for the six months ended June 30, 2001 are not necessarily indicative
of the results for the full year. Pro forma data for the year ended December 31,
2000 and for the six months ended and as of June 30, 2001 are derived from the
unaudited pro forma condensed consolidated financial statements of Salem Holding
and give effect to the June 15, 2001 dividend of its subsidiaries CCM and
OnePlace to Salem Communications Corporation, the acquisition of certain assets
of radio stations acquired from affiliates of Clear Channel Communications, Inc.
and AMFM Inc. and certain related transactions, the acquisition of certain
individually insignificant in-format radio stations and the disposition of
certain other radio stations, accrued interest income and expense related to the
loan made by Salem Holding to Salem Communications Corporation, proceeds of
approximately $2.8 million received from the legal settlement related to the
condemnation of certain real property in Seattle, Washington owned by a
subsidiary of Salem Holding and the use of such proceeds to repay borrowings
under Salem Holding's credit facility, and the offering of the old notes and the
application of the net proceeds therefrom, as if such transactions had occurred
at the beginning of the relevant periods, in the case of the Statement of
Operations and Other Data. The actual historical Balance Sheet Data as of June
30, 2001 reflects the effects of all of the above transactions with the
exception of the $2.8 million repayment of debt from the proceeds of the
settlement. The pro forma Balance Sheet Data as of June 30, 2001 gives effect to
the repayment of debt with the $2.8 million of proceeds from the settlement.
While the pro forma data for the year ended December 31, 2000 and the six months
ended June 30, 2001 are based on adjustments we deem appropriate and which are
factually supported based on currently available data, the pro forma data may
not be indicative of what actual results would have been, nor does this
information purport to present Salem Holding's financial results for future
periods. The summary data below should be read in conjunction with "Selected
Consolidated Financial and Other Data," "Unaudited Pro Forma Condensed
Consolidated Financial Statements of Salem Holding," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and the
historical financial statements and the notes thereto included in this
prospectus or incorporated herein by reference.



                                                                                                       PRO FORMA
                                                                    PRO FORMA      SIX MONTHS ENDED    SIX MONTHS
                                     YEAR ENDED DECEMBER 31,        YEAR ENDED         JUNE 30,          ENDED
                                 -------------------------------   DECEMBER 31,   ------------------    JUNE 30,
                                 1998(1)    1999(1)      2000          2000       2000(1)     2001        2001
                                 --------   --------   ---------   ------------   -------   --------   ----------
                                                              (DOLLARS IN THOUSANDS)
                                                                                  
STATEMENT OF OPERATIONS:

Net broadcasting revenue.......  $ 77,891   $ 87,122   $ 107,786    $ 120,224     $47,427   $ 62,254    $ 62,254
Other media revenue............        --      6,424       7,916           --       3,797         --          --
                                 --------   --------   ---------    ---------     -------   --------    --------
Total revenue..................    77,891     93,546     115,702      120,224      51,224     62,254      62,254
Broadcasting operating
  expenses.....................    42,526     46,291      60,121       69,925      26,211     40,107      40,107
Other media operating
  expenses.....................        --      9,985      14,863           --       8,115         --          --
Corporate expenses.............     7,395      8,507      10,457        9,805       5,272      7,235       7,235
Stock and related cash grant...        --      2,550          --           --          --         --          --
Depreciation and
  amortization.................    14,058     18,233      23,243       25,508      10,338     13,113      13,113
                                 --------   --------   ---------    ---------     -------   --------    --------
Operating income (loss)........    13,912      7,980       7,018       14,986       1,288      1,799       1,799
Interest income................       291      1,005         504          908         351         66          66
Interest income from related
  party(2).....................        --         --       1,249        7,734          --      5,366       5,366
Gain (loss) on sale of
  assets.......................       236       (219)        773       (3,749)      4,408      2,323       2,323
Gain on sale of assets to
  related party................        --         --      28,794           --          --         --          --
Interest expense...............   (15,941)   (14,219)    (15,572)     (26,369)     (5,219)   (12,747)    (13,752)
Other income (expense), net....      (422)      (633)       (856)      (1,925)       (420)      (112)       (112)
                                 --------   --------   ---------    ---------     -------   --------    --------
Income (loss) before income
  taxes and extraordinary
  item.........................    (1,924)    (6,086)     21,910       (8,415)        408     (3,305)     (4,310)
Provision (benefit) for income
  taxes........................      (343)    (1,611)      8,249       (2,925)        464     (1,366)     (1,781)
                                 --------   --------   ---------    ---------     -------   --------    --------
Income (loss) before
  extraordinary item...........    (1,581)    (4,475)     13,661       (5,490)        (56)    (1,939)     (2,529)
Extraordinary loss, net of tax
  effect.......................        --     (3,570)         --           --          --         --          --
                                 --------   --------   ---------    ---------     -------   --------    --------
Net income (loss)..............  $ (1,581)  $ (8,045)  $  13,661    $  (5,490)    $   (56)  $ (1,939)   $ (2,529)
                                 ========   ========   =========    =========     =======   ========    ========


                                        3




                                                                                                       PRO FORMA
                                                                    PRO FORMA      SIX MONTHS ENDED    SIX MONTHS
                                     YEAR ENDED DECEMBER 31,        YEAR ENDED         JUNE 30,          ENDED
                                 -------------------------------   DECEMBER 31,   ------------------    JUNE 30,
                                 1998(1)    1999(1)      2000          2000       2000(1)     2001        2001
                                 --------   --------   ---------   ------------   -------   --------   ----------
                                                              (DOLLARS IN THOUSANDS)
                                                                                  
OTHER DATA:
Broadcast cash flow(3).........  $ 35,365   $ 40,831   $  47,665    $  50,299     $21,216   $ 22,148    $ 22,148
Broadcast cash flow margin.....      45.4%      46.8%       44.2%        41.8%       44.7%      35.6%       35.6%
EBITDA(3)......................    27,970     28,763      30,261       40,494      11,626     14,912      14,912
Broadcast EBITDA(3)............    27,970     32,324      37,208       40,494      15,944     14,912      14,912
Operating cash flow(4).........    28,261     29,768      32,014       49,136      11,557     20,344      20,344
Pro forma debt to pro forma
  EBITDA(5)....................                                           7.1x
Pro forma debt to pro forma
  operating cash flow(5).......                                           5.9x
Ratio of earnings to fixed
  charges:
  Actual.......................       0.9x       0.6x        2.2x                     1.1x       0.8x
  Pro forma (6)................                              2.1x                                0.7x
Coverage deficiency:
  Actual.......................     1,924      6,085          --                       --      9,371
  Pro forma....................                               --                              10,376
Cash flows related to:
  Operating activities.........  $ 11,015   $  8,204   $  12,628    $  22,861       7,177      7,034    $  6,029
  Investing activities.........   (31,762)   (35,159)   (173,527)    (172,479)    (46,927)   (13,472)    (13,472)
  Financing activities.........    21,019     59,162     130,387      275,209      10,058      6,338       6,338




                                                                                                         PRO FORMA
                                                                                              AS OF        AS OF
                                                                                            JUNE 30,     JUNE 30,
                                                                                              2001         2001
                                                                                            ---------   -----------
                                                                                            (DOLLARS IN THOUSANDS)
                                                                                   
BALANCE SHEET DATA:
Cash and cash equivalents................................................................   $  3,420     $    662
Intangible assets, net...................................................................    248,098      248,098
Total assets.............................................................................    463,240      460,482
Total debt (including current portion)...................................................    303,592      300,834
Total stockholders' equity...............................................................    146,187      146,187


-------------------------
(1) Summary consolidated financial and other data of Salem Holding as of and for
    the two years ended December 31, 1999 and as of and for the six months ended
    June 30, 2000 is identical to Salem Communications Corporation's
    consolidated financial results for those periods because Salem
    Communications Corporation formed Salem Holding as a wholly-owned subsidiary
    in May 2000 and assigned substantially all of its assets and liabilities to
    Salem Holding in August 2000. This transaction was accounted for as an
    exchange of assets among entities under common control and, accordingly, the
    assets exchanged were recorded at their historical cost in a manner similar
    to the pooling of interest method of accounting.

(2) Represents accrued interest income on a promissory note from Salem
    Communications Corporation. Salem Holding borrowed under its credit facility
    to make the related loan to Salem Communications Corporation. See
    "Management's Discussion and Analysis of Financial Condition and Results of
    Operations -- Liquidity and Capital Resources."

(3) We define broadcast cash flow as net operating income, excluding other media
    revenue and other media operating expenses, before depreciation and
    amortization and corporate expenses. We define EBITDA as net operating
    income before depreciation and amortization. We define broadcast EBITDA as
    EBITDA excluding other media businesses. EBITDA for the year ended December
    31, 1999 excludes a $2.6 million charge ($1.9 million, net of income tax)
    for a one-time stock grant concurrent with our initial public offering.
    Although broadcast cash flow, EBITDA and broadcast EBITDA are not measures
    of performance calculated in accordance with generally accepted accounting
    principles, we believe that they are useful because they are measures widely
    used in the

                                        4


    radio broadcast industry to evaluate a radio company's operating
    performance. However, you should not consider broadcast cash flow, EBITDA
    and broadcast EBITDA in isolation or as substitutes for net income, cash
    flows from operating activities and other statement of operations or cash
    flows data prepared in accordance with generally accepted accounting
    principles as a measure of liquidity or profitability. These measures are
    not necessarily comparable to similarly titled measures employed by other
    companies.

(4) We define operating cash flow as consolidated net income (adjusted to
    exclude, among other things, net gains on dispositions of assets outside the
    ordinary course of business) plus specified net losses, taxes, interest
    expense, and depreciation, amortization and other non-cash charges, in
    accordance with the indentures governing the notes and the existing 9 1/2%
    notes. This includes accrued interest income.

(5) Pro forma debt to pro forma EBITDA and pro forma debt to pro forma operating
    cash flow represent total pro forma debt, including current portion and the
    effects of the offering of the 9% notes and other transactions reflected in
    the unaudited pro forma condensed financial statements of Salem Holding,
    outstanding at the end of the relevant period, divided by pro forma EBITDA
    and pro forma operating cash flow, respectively.

(6) For purposes of computing the pro forma ratio of earnings to fixed charges,
    "earnings" consist of income (loss) before income taxes and extraordinary
    item plus fixed charges, and "fixed charges" consist of interest expense
    plus an allocation of a portion of rent expense representing interest. The
    pro forma earnings to fixed charges ratio gives effect only to the issuance
    of the notes offered hereby and the repayment of borrowings under Salem
    Holding's credit facility as if each occurred at the beginning of the period
    presented. For the years ended December 31, 1998 and 1999 and for the six
    months ended June 30, 2001, and for the six months ended June 30, 2001 on a
    pro forma basis, our earnings were inadequate to cover fixed charges; the
    coverage deficiency for the years ended December 31, 1998 and 1999 was $1.9
    million and $6.1 million, respectively. The coverage deficiency for the six
    months ended June 30, 2001 was $3.3 million (actual) and $4.3 million (pro
    forma).

                                        5


                        SUMMARY OF THE EXCHANGE OFFERING

     The summary below describes the principal terms of the exchange offer. A
more detailed description is contained in the section "The Exchange Offer."
Certain of the terms and conditions described below are subject to important
limitations and exceptions. The "Description of the Notes" section of this
prospectus contains a more detailed description of the terms and conditions of
the exchange notes.

The Exchange Offer.........  Salem Holding is offering to exchange $1,000
                             principal amount of its exchange notes, which have
                             been registered under the Securities Act, for each
                             $1,000 principal amount of its unregistered old
                             notes. Salem Holding issued the old notes on June
                             25, 2001 in a private offering. The terms of the
                             exchange notes are substantially identical to the
                             terms of the old notes.

                             In order to exchange your old notes, you must
                             properly tender them before the expiration of the
                             exchange offer. All old notes that are validly
                             tendered and not validly withdrawn will be
                             exchanged. Salem Holding will issue the exchange
                             notes on or promptly after the expiration of the
                             exchange offer.

                             You may tender your old notes for exchange notes in
                             whole or in part in integral multiples of $1,000
                             principal amount.

Registration Rights
Agreement..................  Salem Holding sold the old notes on June 25, 2001
                             to a group of initial purchasers. Simultaneously
                             with that sale, Salem Holding entered into a
                             registration rights agreement relating to the old
                             notes with the initial purchasers, which requires
                             it to conduct the exchange offer.

                             You have the right under the registration rights
                             agreement to exchange your old notes for exchange
                             notes with substantially identical terms. This
                             exchange offer is intended to satisfy those rights.
                             After this exchange offer is complete, you will no
                             longer be entitled to any exchange or registration
                             rights with respect to your old notes.

                             For a description of the procedures for tendering
                             your old notes, see "The Exchange
                             Offer -- Procedures for Tendering Old Notes."

Expiration Date............  5:00 p.m., New York City time,             , 2001,
                             unless the exchange offer is extended, in which
                             case the expiration date will be the latest date
                             and time to which the exchange offer is extended.
                             See "The Exchange Offer -- Terms of the Exchange
                             Offer."

Consequences of Failure to
  Exchange Your Old
  Notes....................  If you do not exchange your old notes for exchange
                             notes in the exchange offer, you will still have
                             the restrictions on transfer provided in the old
                             notes and in the indenture governing both the old
                             notes and the exchange notes. In general, the old
                             notes may not be offered or sold unless registered
                             or exempt from registration under the Securities
                             Act, or in a transaction not subject to the
                             Securities Act and applicable state securities
                             laws. Salem Holding does not plan to register the
                             old notes under the Securities Act.

Conditions to the Exchange
Offer......................  The exchange offer is subject to customary
                             conditions described under "The Exchange
                             Offer -- Conditions to the Exchange Offer," some of
                             which Salem Holding may waive in its discretion.
                             The exchange offer is not conditioned upon any
                             minimum principal amount

                                        6


                             of old notes being tendered. Salem Holding reserves
                             the right, subject to applicable law, at any time
                             and from time to time:

                             - to terminate the exchange offer if one or more
                               specific conditions have not been satisfied;

                             - to extend the expiration date of the exchange
                               offer and retain all tendered old notes, subject,
                               however, to the right of the tendering holders to
                               withdraw their tendered old notes; or

                             - to waive any condition or otherwise amend the
                               terms of the exchange offer in any respect.

                             See "The Exchange Offer -- Terms of the Exchange
                             Offer."

Procedures for Tendering
Old Notes..................  If you wish to tender your old notes for exchange
                             notes, you must:

                             - complete and sign a letter of transmittal in
                               accordance with the instructions contained in the
                               letter of transmittal; and

                             - forward the completed letter of transmittal by
                               mail, facsimile or hand delivery, together with
                               any other required documents, to the exchange
                               agent, either with the old notes to be tendered
                               or in compliance with the specified procedures
                               for guaranteed delivery of such old notes.

                             Specified brokers, dealers, commercial banks, trust
                             companies and other nominees may also effect
                             tenders by book-entry transfer.

                             Letters of transmittal and certificates
                             representing old notes should not be sent to Salem
                             Holding. Those documents should be sent only to the
                             exchange agent. The address, and telephone and
                             facsimile numbers, of the exchange agent are set
                             forth in "The Exchange Offer -- Exchange Agent" and
                             in the letter of transmittal.

Special Procedures for
Beneficial Owners..........  If your old notes are registered in the name of a
                             broker, dealer, commercial bank, trust company or
                             other nominee, we urge you to contact your nominee
                             holder promptly if you wish to tender such old
                             notes. See "The Exchange Offer -- Procedures for
                             Tendering Old Notes."

Withdrawal of Tenders......  You may withdraw the tender of your old notes at
                             any time on or prior to the expiration date by
                             delivering a written notice of withdrawal to the
                             exchange agent in conformity with the procedures
                             discussed under "The Exchange Offer -- Withdrawal
                             of Tenders."

Acceptance of Old Notes and
  Delivery of Exchange
  Notes....................  Upon consummation of the exchange offer, Salem
                             Holding will accept any and all old notes that are
                             properly tendered in the exchange offer and not
                             withdrawn prior to 5:00 p.m., New York City time,
                             on the expiration date. The exchange notes issued
                             pursuant to the exchange offer will be delivered
                             promptly after acceptance of the tendered old
                             notes. See "The Exchange Offer -- Terms of the
                             Exchange Offer."

                                        7


Resales of Exchange
Notes......................  Salem Holding believes that you will be able to
                             offer for resale, resell or otherwise transfer
                             exchange notes issued in the exchange offer without
                             compliance with the registration and prospectus
                             delivery provisions of the federal securities laws,
                             provided that:

                             - you are acquiring the exchange notes in the
                               ordinary course of your business;

                             - you are not participating, and have no
                               arrangement or understanding with any person to
                               participate, in a distribution of the exchange
                               notes; and

                             - you are not an "affiliate" of Salem Holding, as
                               the term is defined for the purposes of Rule 144A
                               under the Securities Act.

                             Salem Holding's belief is based on interpretations
                             by the staff of the Securities and Exchange
                             Commission, as set forth in no-action letters
                             issued to third parties unrelated to Salem Holding.
                             The staff of the Commission has not considered this
                             exchange offer in the context of a no-action
                             letter, and Salem Holding cannot assure you that
                             the staff of the Commission would make a similar
                             determination with respect to this exchange offer.

                             If Salem Holding's belief is not accurate and you
                             transfer an exchange note without delivering a
                             prospectus meeting the requirements of the federal
                             securities laws or without an exemption from these
                             laws, you may incur liability under the federal
                             securities laws. Salem Holding does not and will
                             not assume, or indemnify you against, this
                             liability.

                             Each broker-dealer that receives exchange notes for
                             its own account in exchange for old notes that such
                             broker-dealer acquired as a result of market-making
                             or other trading activities must agree to deliver a
                             prospectus meeting the requirements of the federal
                             securities laws in connection with any resale of
                             the exchange notes. See "The Exchange
                             Offer -- Resales of the Exchange Notes."

Exchange Agent.............  The exchange agent for the exchange offer is The
                             Bank of New York. The address, telephone number and
                             facsimile number of the exchange agent are provided
                             in "The Exchange Offer -- Exchange Agent" and in
                             the letter of transmittal.

Use of Proceeds............  Salem Holding will not receive any cash proceeds
                             from the issuance of the exchange notes. See "Use
                             of Proceeds."

Certain Federal Income Tax
  Consequences.............  Your acceptance of an exchange offer and the
                             related exchange of your old notes for exchange
                             notes will not be a taxable exchange for United
                             States federal income tax purposes. You should not
                             recognize any taxable gain or loss or any interest
                             income as a result of the exchange.

                                        8


                   SUMMARY OF THE TERMS OF THE EXCHANGE NOTES

     The following is a summary of the principal terms of the exchange notes. A
more detailed description is contained in the section "Description of the
Notes."

Issuer.....................  Salem Communications Holding Corporation.

Securities Offered.........  $150,000,000 principal amount of 9% Senior
                             Subordinated Notes due 2011.

Maturity...................  July 1, 2011.

Interest Payment Dates.....  Each January 1 and July 1, beginning on January 1,
                             2002. Interest will accrue from and including June
                             25, 2001 or the last payment date upon which
                             interest on the old notes was paid.

Ranking....................  The exchange notes will:

                             - be unsecured senior subordinated obligations of
                               Salem Holding; and

                             - be subordinated in right of payment to all
                               existing and future senior debt of Salem Holding,
                               including borrowings under the credit facility.

                             The guarantees will:

                             - be unsecured senior subordinated obligations of
                               each guarantor; and

                             - be subordinated in right of payment to all
                               existing and future senior debt of the
                               guarantors, including guarantees of borrowings
                               under the credit facility.

                             As of June 30, 2001, pro forma for the application
                             of the proceeds of a $2.8 million legal settlement,
                             Salem Holding and its subsidiaries would have had
                             $49.6 million of senior debt.

Guarantees.................  The old notes are and on the issue date the
                             exchange notes will be fully and unconditionally
                             guaranteed by Salem Communications Corporation and
                             all of its subsidiaries (other than Salem Holding).
                             If Salem Communications Corporation or Salem
                             Holding creates or acquires a new subsidiary, such
                             subsidiary will guarantee the exchange notes if
                             such subsidiary guarantees any of Salem Holding's
                             other indebtedness, including indebtedness under
                             the credit facility and the existing 9 1/2% notes.

Unrestricted Guarantors....  Salem Communications Corporation and all of its
                             subsidiaries (other than Salem Holding and Salem
                             Holding's subsidiaries) will not be subject to most
                             of the restrictive covenants contained in the
                             indenture for the exchange notes.

Optional Redemption........  On or after July 1, 2006, Salem Holding may redeem
                             some or all of the exchange notes at the redemption
                             prices listed in "Description of the
                             Notes -- Optional Redemption," plus accrued
                             interest.

                                        9


Optional Redemption After
  Public Equity
  Offerings................  At any time (which may be more than once) before
                             June 25, 2004, Salem Holding can choose to redeem
                             up to 35% of the aggregate principal amount of the
                             exchange notes and the old notes issued under the
                             indenture with the proceeds of one or more public
                             equity offerings, as long as:

                             - Salem Holding pays 109% of the aggregate
                               principal amount of the exchange notes and old
                               notes redeemed, plus interest;

                             - Salem Holding redeems the portion of the exchange
                               notes and old notes redeemed within 60 days of
                               the closing of the public equity offering; and

                             - at least 65% of the aggregate principal amount of
                               the exchange notes and old notes issued under the
                               indenture remains outstanding after any such
                               redemption.

Change of Control Offer....  If a change of control occurs, Salem Holding must
                             give holders of the notes the opportunity to sell
                             their exchange notes to Salem Holding at 101% of
                             the face amount, plus accrued interest.

Asset Sale Proceeds........  If Salem Holding or its restricted subsidiaries
                             engage in certain asset sales, Salem Holding must
                             invest the net cash proceeds from such sales in its
                             business within a specified period of time, prepay
                             senior debt or make an offer to purchase a
                             principal amount of the exchange notes and old
                             notes equal to the remaining excess net cash
                             proceeds. The purchase price of the exchange notes
                             and old notes will be 100% of their principal
                             amount, plus accrued interest.

Certain Indenture
Provisions.................  The indenture governing the exchange notes and old
                             notes contains covenants limiting Salem Holding's
                             and its restricted subsidiaries' ability to:

                             - incur additional debt,

                             - pay dividends or make distributions,

                             - purchase or redeem stock,

                             - make investments and extend credit,

                             - engage in transactions with affiliates,

                             - create liens on assets,

                             - transfer and sell assets, and

                             - merge or consolidate with another company.

                             The covenants in the indenture are subject to a
                             number of important limitations and exceptions and,
                             except in limited cases, do not apply to Salem
                             Communications Corporation and the other
                             unrestricted guarantors.

Risk Factors...............  See "Risk Factors" for a description of certain of
                             the risks you should consider before exchanging any
                             old notes for exchange notes.

                                        10


                                  RISK FACTORS

     Before you participate in the exchange offer, you should carefully consider
the following factors in addition to the other information contained in this and
incorporated by reference into this prospectus.

                      RISKS RELATED TO THE EXCHANGE NOTES

IF YOU FAIL TO EXCHANGE THE OLD NOTES FOR THE EXCHANGE NOTES YOUR OLD NOTES WILL
REMAIN SUBJECT TO THE TRANSFER RESTRICTIONS OF THE INDENTURE.

     If you do not exchange your old notes for exchange notes in the exchange
offer, you will still have the restrictions on transfer provided in the old
notes and the indenture. In general, the old notes may not be offered or sold
unless registered or exempt from registration under the Securities Act, or in a
transaction not subject to the Securities Act and applicable state securities
laws. Salem Holding does not plan to register the old notes under the Securities
Act.

BECAUSE THERE IS NO PUBLIC MARKET FOR THE EXCHANGE NOTES, YOU MAY NOT BE ABLE TO
RESELL THE EXCHANGE NOTES.

     There is no established trading market for the exchange notes and we cannot
assure you that a market for the exchange notes will develop in the future.
There can be no assurance as to (i) the liquidity of any such market that may
develop, (ii) the ability of the holders of exchange notes to sell any of their
exchange notes, or (iii) the price at which the holders of the exchange notes
would be able to sell any of their exchange notes. If such a market were to
develop, the exchange notes could trade at prices that are higher or lower that
the initial offering price depending on many factors, including prevailing
interest rates, the number of holders of the exchange notes, the overall market
for similar securities, our financial performance and prospects and prospects
for companies in our industry generally. Accordingly, no assurance can be given
as to the development or liquidity of any market for the exchange notes.
Historically, the market for securities such as the exchange notes has been
subject to disruptions that have caused substantial volatility in the prices of
similar securities. We cannot assure you that, if a market for the exchange
notes were to develop, such a market would not be subject to similar
disruptions. We do not intend to apply (and are not obligated to apply) for
listing of the exchange notes on any securities exchange or the Nasdaq National
Market.

YOU MUST COMPLY WITH THE PROCEDURES FOR THE EXCHANGE OFFER IN ORDER TO RECEIVE
THE EXCHANGE NOTES.

     You are responsible for complying with all exchange offer procedures. You
will only receive exchange notes in exchange for your old notes if, prior to the
offer expiration date, you deliver the following to the exchange agent:

     - certificate for the old notes or a book-entry confirmation of a
      book-entry transfer of the old notes into the exchange agent's account
      with the Depository Trust Company ("DTC");

     - the letter of transmittal (or facsimile thereof), properly completed and
      duly executed by you, together with any required signature guarantees; and

     - and other documents required by the letter of transmittal.

     You should allow sufficient time to ensure that the exchange agent receives
all required documents before the expiration date. Neither we nor the exchange
agent has any duty to inform you of defects or irregularities with respect to
the tender of your old notes for exchange notes. See "The Exchange Offer."

OUR SUBSTANTIAL INDEBTEDNESS AND OUR ABILITY TO INCUR MORE INDEBTEDNESS COULD
PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE EXCHANGE NOTES.

     We currently have a substantial amount of debt. As of June 30, 2001, after
giving effect to the application of a $2.8 million legal settlement our total
consolidated debt was $300.9 million.

                                        11


     Our substantial debt could have important consequences for the holders of
the exchange notes, including:

     - making it more difficult for us to satisfy our obligations with respect
       to the exchange notes, borrowings under the credit facility and the
       existing 9 1/2% notes;

     - limiting our ability to obtain additional financing to fund future
       working capital, capital expenditures, acquisitions and other general
       corporate purposes;

     - requiring us to dedicate a substantial portion of our cash flow from
       operations for the payment of interest on our debt and reducing our
       ability to use our cash flow to fund future working capital, capital
       expenditures, acquisitions and other general corporate requirements; and

     - limiting our flexibility in planning for, or reacting to, changes in our
       business and the industry that could make us more vulnerable to adverse
       changes in general economic, industry and competitive conditions and
       adverse changes in government regulations.

     The indenture governing the old notes and the exchange notes offered hereby
and the indenture governing the indenture governing the existing 9 1/2% notes
permit Salem Holding and its subsidiaries to incur additional debt. The
indentures do not place any restrictions on the ability of Salem Communications
Corporation or any other unrestricted guarantor to incur debt. Pursuant to the
covenants of the credit facility, as of June 30, 2001, on a pro forma basis,
Salem Holding would be permitted to incur an additional $54.7 million of
indebtedness and all of those borrowings would be senior in right of payment to
the exchange notes. We anticipate incurring additional debt to fund future
acquisitions and for other corporate purposes. If new debt is added to our and
our subsidiaries' current debt levels, the related risks that we and they now
face could intensify. See "Description of Existing Indebtedness" for additional
information.

SERVICING SALEM HOLDING'S DEBT WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH, AND
OUR ABILITY TO GENERATE SUFFICIENT CASH DEPENDS ON MANY FACTORS, SOME OF WHICH
ARE BEYOND OUR CONTROL.

     Salem Holding's ability to make payments on the exchange notes and its
other debt and to fund its business plan depends on its and its subsidiaries'
ability to generate cash flow in the future. This, to some extent, is subject to
general economic, financial, competitive, legislative and regulatory factors and
other factors that are beyond our control. In addition, Salem Holding's ability
to borrow funds in the future will depend on its meeting the financial covenants
in its debt instruments, including a fixed charge coverage test and leverage
ratio test under the credit facility. We cannot assure you that our business
will generate cash flow from operations or that future borrowings will be
available to us under the credit facility or otherwise in an amount sufficient
to enable us to service our debt, including the exchange notes, or to fund other
liquidity needs. As a result, we may need to refinance all or a portion of our
debt on or before maturity. The credit facility and the existing 9 1/2% notes
mature in 2007. We cannot assure you that we will be able to refinance any of
our debt on favorable terms, if at all. Any inability to generate sufficient
cash flow or refinance our debt on favorable terms could have a material adverse
effect on our financial condition and on Salem Holding's ability to make
interest and principal payments on the exchange notes.

COVENANT RESTRICTIONS UNDER THE CREDIT FACILITY, THE EXISTING INDENTURE AND THE
INDENTURE GOVERNING THE EXCHANGE NOTES OFFERED HEREBY MAY LIMIT OUR ABILITY TO
OPERATE OUR BUSINESS.

     The credit facility and the indentures governing the existing 9 1/2% notes,
the old notes and the notes, offered hereby contain, among other things,
covenants that restrict Salem Holding's and its subsidiaries' ability to finance
future operations or capital needs or to engage in other business activities.
The credit facility and each of the indentures restrict, among other things,
their ability to:

     - incur additional debt,

     - pay dividends or make distributions,

     - purchase or redeem stock,
                                        12


     - make investments and extend credit,

     - engage in transactions with affiliates,

     - create liens on assets,

     - transfer and sell assets, and

     - effect a consolidation or merger or sell, transfer, lease, or otherwise
       dispose of all or substantially all of its assets.

     These restrictions on our management's ability to operate Salem Holding's
business could have a material adverse effect on us.

     The covenants in each indenture are subject to a number of important
limitations and exceptions. These limitations and exceptions will, for example,
allow Salem Holding to make certain restricted payments to and investments in
Salem Communications Corporation, subject to specified limitations.

     In addition, the credit facility will require us to maintain specified
financial ratios and satisfy certain financial condition tests which may require
that we take action to reduce our debt or to act in a manner contrary to our
business objectives. Events beyond our control, including changes in general
economic and business conditions, may affect our ability to meet those financial
ratios and financial condition tests. We cannot assure you that we will meet
those tests or that the lenders under the credit facility will waive any failure
to meet those tests.

     A breach of any of these covenants could result in a default under the
credit facility and both indentures. If an event of default occurs under any of
these agreements, the lenders could elect to declare all amounts outstanding
thereunder, together with accrued interest, to be immediately due and payable.

     If we are unable to pay our obligations to the lenders under the credit
facility or other future senior debt instruments, the lenders could proceed
against any or all of the collateral securing the indebtedness under the credit
facility. The collateral under the credit facility consists of substantially all
of our existing assets. In addition, a breach of certain of these restrictions
or covenants, or an acceleration by these lenders of the obligations to them,
would cause a default under the old notes, the exchange notes as well as under
the existing 9 1/2% notes. We may not have, or be able to obtain, sufficient
funds to make accelerated payments, including payments on the old notes and the
exchange notes, or to repay the old notes and the exchange notes in full after
we pay the senior secured lenders to the extent of their collateral.

SALEM COMMUNICATIONS CORPORATION AND THE OTHER UNRESTRICTED GUARANTORS WILL NOT
BE SUBJECT TO MOST OF THE RESTRICTIVE COVENANTS OF THE INDENTURE GOVERNING THE
EXCHANGE NOTES.

     The covenant restrictions contained in the indenture governing the exchange
notes and the old notes, and the indenture governing the existing 9 1/2% notes
will apply in large part only to Salem Holding and its restricted subsidiaries.
Salem Communications Corporation and the other unrestricted guarantors will be
subject to limitations on layering senior subordinated indebtedness and merging
or consolidating, or selling, transferring, leasing or otherwise disposing of
all or substantially all of their assets, but they will not otherwise have
limitations under these agreements on their ability, for example, to:

     - incur debt,

     - pay dividends or make distributions,

     - purchase or redeem stock,

     - make investments and extend credit,

     - engage in transactions with affiliates,

     - create liens on their assets, or

     - transfer and sell assets.

                                        13


SALEM HOLDING IS A HOLDING COMPANY WHICH HAS NO OPERATIONS AND WILL DEPEND ON
ITS OPERATING SUBSIDIARIES FOR CASH TO MAKE PAYMENTS ON THE EXCHANGE NOTES.

     As a holding company, Salem Holding will not hold any significant assets
other than its direct and indirect interests in its subsidiaries which conduct
all of its operations. Salem Holding's cash flow will depend upon the cash flow
of its operating subsidiaries and the payment of funds by its operating
subsidiaries to Salem Holding. Salem Holding's operating subsidiaries may not be
able to make funds available to it. This could adversely affect Salem Holding's
ability to meet its obligations to you as a holder of the exchange notes.

     Salem Holding's operating subsidiaries are separate and distinct legal
entities and, except pursuant to their guarantees, are not obligated to make
funds available for payment of the exchange notes and other obligations in the
form of loans, distributions or otherwise. In addition, Salem Holding's
operating subsidiaries' ability to make any such loans, distributions or other
payments to Salem Holding will depend on their earnings, business and tax
considerations and legal restrictions, which may adversely impact Salem
Holding's ability to pay interest and principal due on the exchange notes.

SALEM COMMUNICATIONS CORPORATION AND THE OTHER UNRESTRICTED GUARANTORS ARE NOT
SUBSIDIARIES OF SALEM HOLDING, THE ISSUER OF THE EXCHANGE NOTES, AND ARE NOT
OBLIGATED TO MAKE FUNDS AVAILABLE TO SALEM HOLDING TO MAKE PAYMENTS ON THE
EXCHANGE NOTES OR SALEM HOLDING'S OTHER OBLIGATIONS.

     Salem Communications Corporation and the other unrestricted guarantors are
not subsidiaries of Salem Holding, the issuer of the exchange notes. As such,
Salem Holding has no ability to control Salem Communications Corporation and the
other unrestricted guarantors and cannot cause them to make funds available to
Salem Holding to permit Salem Holding to make payments on the exchange notes.
Salem Communications Corporation and the other unrestricted guarantors, except
pursuant to their guarantees, are not obligated under the indenture or otherwise
to make funds available for payment of the exchange notes and other obligations
in the form of loans, capital contributions or otherwise.

YOUR RIGHT TO RECEIVE PAYMENT ON THE EXCHANGE NOTES AND THE GUARANTEES IS
SUBORDINATED IN RIGHT OF PAYMENT TO ALL OF OUR AND THE GUARANTORS' SENIOR DEBT.

     The exchange notes will be general unsecured obligations, subordinated in
right of payment to all existing and future senior debt of Salem Holding and
that of each guarantor of the notes, respectively, including obligations under
the credit facility. The exchange notes will not be secured by any of Salem
Holding's or the guarantors' assets, and as such will be effectively
subordinated to any secured debt that Salem Holding or the guarantors may have
now, including obligations under the credit facility, or may incur in the future
to the extent of the value of the assets securing that debt.

     In the event that Salem Holding or a guarantor is declared bankrupt,
becomes insolvent or is liquidated or reorganized, any debt that ranks ahead of
the old notes, the exchange notes and the guarantees thereof will be entitled to
be paid in full from Salem Holding's assets or the assets of the guarantor, as
applicable, before any payment may be made with respect to the old notes, the
exchange notes or the affected guarantees. In any of the foregoing events, we
cannot assure you that Salem Holding would have sufficient assets to pay amounts
due on the old notes and the exchange notes. As a result, holders of the old
notes and the exchange notes may receive less, proportionally, than the holders
of debt senior to the old notes, the exchange notes and the guarantees. The
subordination provisions of the indenture governing the old notes and the
exchange notes will also provide that Salem Holding can make no payment to you
during the continuance of payment defaults on its designated senior debt, and
payments to you may be suspended for a period of up to 179 days if a nonpayment
default exists under its designated senior debt. See "Description of the
Notes -- Subordination" for additional information. Also, in the event of
bankruptcy, insolvency, liquidation or reorganization, holders of the old notes
and the exchange notes will participate ratably with all holders of Salem
Holding's subordinated indebtedness that is deemed to be of the same class as
the old notes and the exchange notes (including the existing 9 1/2% notes) and
potentially with all Salem Holding's general creditors in distributions of its
remaining assets.

                                        14


     As of June 30, 2001, on a pro forma basis, the old notes, the exchange
notes and the guarantees would have been subordinated in right of payment to
$50.9 million of senior debt of Salem Holding. The indentures governing the old
notes and the exchange notes and the existing 9 1/2% notes and the credit
facility permit, subject to specified limitations, the incurrence of additional
debt, some or all of which may be senior debt.

THE GUARANTEES MAY NOT BE ENFORCEABLE BECAUSE OF FRAUDULENT CONVEYANCE LAWS.

     The incurrence of the guarantees by the guarantors may be subject to review
under U.S. federal bankruptcy law or relevant state fraudulent conveyance laws
if a bankruptcy case or lawsuit is commenced by or on behalf of any guarantors'
unpaid creditors. Under these laws, if in such a case or lawsuit a court were to
find that, at the time any such guarantor incurred a guarantee of the exchange
notes, such guarantor:

     - incurred the guarantee of the exchange notes with the intent of
       hindering, delaying or defrauding current or future creditors; or

     - received less than reasonably equivalent value or fair consideration for
       incurring the guarantee of the exchange notes and such guarantor:

       - was insolvent or was rendered insolvent;

       - was engaged, or about to engage, in a business or transaction for which
         its remaining assets constituted unreasonably small capital to carry on
         its business; or

       - intended to incur, or believed that it would incur, debts beyond its
         ability to pay as such debts matured;

(as all of the foregoing terms are defined in or interpreted under the relevant
fraudulent transfer or conveyance statutes), then such court could void the
guarantee of such guarantor or subordinate the amounts owing under such
guarantee to such guarantor's presently existing or future debt or take other
actions detrimental to you.

     It may be asserted that the guarantors incurred their guarantees for the
benefit of Salem Holding and they incurred the obligations under the guarantees
for less than reasonably equivalent value or fair consideration.

     The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law of the jurisdiction that is being applied in any
such proceeding. Generally, a company would be considered insolvent if, at the
time it incurred the debt or issued the guarantee:

     - the sum of its debts (including contingent liabilities) is greater than
       its assets, at fair valuation;

     - the present fair saleable value of its assets is less than the amount
       required to pay the probable liability on its total existing debts and
       liabilities (including contingent liabilities) as they become absolute
       and matured; or

     - it incurred obligations beyond its ability to pay as such obligations
       become due.

     We believe that, at the time the guarantors initially incur the debt
represented by the guarantees, the guarantors will not be insolvent or rendered
insolvent by the incurrence, be lacking sufficient capital to run their
businesses effectively, or be unable to pay obligations on the guarantees as
they mature or become due. We cannot assure you, however, that a court passing
on the same questions would reach the same conclusions.

     If a guarantee is avoided as a fraudulent conveyance or found to be
unenforceable for any other reason, you will not have a claim against that
obligor and will only be a creditor of Salem Holding or any guarantor whose
obligation was not set aside or found to be unenforceable.

                                        15


SALEM HOLDING MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE
THE CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE.

     Upon a change of control, Salem Holding is required to offer to repurchase
all outstanding old notes and exchange notes at 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of repurchase.
The source of funds for any such purchase of old notes and exchange notes will
be Salem Holding's available cash or cash generated from its subsidiaries'
operations or other sources, including borrowings, sales of assets or sales of
equity. We cannot assure you that sufficient funds will be available at the time
of any change of control to make any required repurchases of old notes and
exchange notes tendered. In addition, the terms of the credit facility limit
Salem Holding's ability to purchase your old notes and exchange notes in those
circumstances. Upon a change of control, Salem Holding will also be required to
offer to repurchase all of the existing 9 1/2% notes, and may be required
immediately to repay the outstanding principal, accrued interest and any other
amounts owed by it under the credit facility. Any of Salem Holding's future debt
agreements may contain similar restrictions and provisions. If the holders of
the old notes and exchange notes exercise their right to require Salem Holding
to repurchase all of the old notes and exchange notes upon a change of control,
the financial effect of this repurchase could cause a default under Salem
Holding's other debt, even if the change of control itself would not cause a
default. Accordingly, it is possible that Salem Holding will not have sufficient
funds at the time of the change of control to make the required repurchase of
old notes and exchange notes or that restrictions in the credit facility will
not allow such repurchases.

                         RISKS RELATED TO OUR BUSINESS

WE MAY NOT PURSUE POTENTIALLY MORE PROFITABLE BUSINESS OPPORTUNITIES OUTSIDE OF
OUR RELIGIOUS AND FAMILY ISSUES FORMATS WHICH MAY HAVE A MATERIAL EFFECT ON OUR
BUSINESS.


     We are fundamentally committed to broadcasting formats emphasizing
religious and family issues. We may not switch to other formats or pursue
potentially more profitable business opportunities in response to changing
audience preferences. We do not intend to pursue business opportunities that
would conflict with our core commitment to religious and family issues formats
even if such opportunities would be more profitable. Our decision not to pursue
other formats might result in lower operating revenues than we might otherwise
achieve.



IF WE ARE UNABLE TO SUCCESSFULLY EXECUTE OUR ACQUISITION STRATEGY, OUR BUSINESS
MAY NOT CONTINUE TO GROW AS EXPECTED.



     We intend to continue to acquire radio stations as well as other
complementary media businesses. Our acquisition strategy has been, and will
continue to focus on, the acquisition of strong signal stations in the top 25
markets. However, we may not be able to successfully identify and consummate
future acquisitions, and stations that we do acquire may not increase our
broadcast cash flow or yield other anticipated benefits. Acquisitions in markets
in which we already have a presence may not increase our broadcast cash flow due
to saturation of audience demand. Acquisitions in smaller markets may have less
potential to increase operating revenues. Our failure to execute our acquisition
strategy successfully in the future could limit our ability to continue to grow
in terms of number of stations or profitability.



WE MAY BE UNABLE TO INTEGRATE THE OPERATIONS AND MANAGEMENT OF ACQUIRED
STATIONS, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND
OPERATING RESULTS.



     Since January 1, 2000 we acquired or agreed to acquire and/or operate 32
radio stations and we expect to make acquisitions of other stations and station
groups in the future.


     We cannot assure you that we will be able to integrate successfully the
operations or management of acquired stations, or the operations or management
of stations that might be acquired in the future. Acquisitions of stations will
require us to manage a significantly larger and likely more geographically
diverse radio station portfolio than historically has been the case. Our
inability to integrate and manage newly acquired stations successfully could
have a material adverse effect on our business and operating results.
                                        16



IF WE ARE UNABLE TO IMPLEMENT OUR CLUSTER STRATEGY, WE MAY NOT REALIZE
ANTICIPATED OPERATING EFFICIENCIES.


     As part of our operating strategy, we attempt to realize efficiencies of
operating costs and cross-selling of programming and advertising by clustering
the operations of two or more radio stations in a single market. However, there
can be no assurances that this operating strategy will be successful.
Furthermore, we cannot assure you that the clustering of radio stations in one
market will not result in downward pressure on advertising and programming rates
at one or more of the existing or new radio stations within the cluster. There
can be no assurance that any of our stations will be able to maintain or
increase its current listening audience and operating revenue in circumstances
where we implement our clustering strategy.

     Additionally, Federal Communications Commission rules and policies allow a
broadcaster to own a number of radio stations in a given market and permit,
within limits, joint arrangements with other stations in a market relating to
programming, advertising sales and station operations. We believe that radio
stations that elect to take advantage of these clustering opportunities may, in
certain circumstances, have lower operating costs and may be able to offer
advertisers more attractive rates and services. The future development of our
business in new markets, as well as the maintenance of our business growth in
those markets in which we do not currently have radio station clusters, may be
negatively impacted by competitors who are taking advantage of these clustering
opportunities by operating multiple radio stations within markets.

THE RESTRICTIONS ON OWNERSHIP OF MULTIPLE STATIONS IN EACH MARKET MAY PREVENT US
FROM IMPLEMENTING OUR CLUSTER STRATEGY.

     As part of our growth strategy, we seek to acquire additional radio
stations in markets in which we already have existing stations. However, our
ability to acquire, operate and integrate any such future acquisition as part of
a cluster may be limited by antitrust and FCC regulation affecting acquisitions
where the proposed buyer or manager already owns one or more radio stations in
the relevant market. We cannot predict whether the Department of Justice, the
Federal Trade Commission or a private party will challenge a proposed
acquisition, and such challenges could affect our ability to implement our
cluster acquisition strategy.


GOVERNMENT REGULATION OF THE BROADCASTING INDUSTRY BY THE FTC AND DOJ MAY LIMIT
OUR ABILITY TO ACQUIRE OR DISPOSE OF RADIO STATIONS.



     The FTC and the DOJ evaluate transactions to determine whether those
transactions should be challenged under federal antitrust laws. We are aware
that the FTC and the DOJ have been increasingly active in their review of radio
station acquisitions. This is particularly the case when a radio broadcast
company proposes to acquire an additional station in an existing market. As we
have gained a presence in a greater number of markets and a greater percentage
of the top 25 markets, our future proposed transactions may more frequently be
subject to more aggressive review by the FTC or the DOJ due to market
concentration concerns. This increased level of review may be accentuated in
instances where we propose to engage in a transaction with parties who
themselves have multiple stations in the relevant market. The FCC might not
approve a proposed radio station acquisition or disposition when the DOJ has
expressed market concentration concerns with respect to the buy or sell side of
a given transaction, even if the proposed transaction would otherwise comply
with the FCC's numerical limits on in-market ownership. We cannot be sure that
the DOJ or the FTC will not seek to prohibit or require the restructuring of our
future acquisitions on these or other bases.



IF WE ARE NOT BE ABLE TO OBTAIN FINANCING OR GENERATE SUFFICIENT CASH FLOWS FROM
OPERATIONS, WE MAY BE UNABLE TO FUND FUTURE ACQUISITIONS.


     We will require significant financing to fund our acquisition strategy and
implement our business plan. This financing may not be available to us. The
availability of funds under the credit facility at any time will be dependent
upon, among other factors, our ability to satisfy financial covenants. Our
future operating

                                        17



performance will be subject to financial, economic, business, competitive,
regulatory and other factors, many of which are beyond our control. Accordingly,
we cannot assure you that our future cash flows or borrowing capacity will be
sufficient to allow us to complete future acquisitions or implement our business
plan, which could have a material adverse effect on our business and results of
operations.



IF WE CANNOT ATTRACT THE ANTICIPATED LISTENER AND ADVERTISER BASE FOR OUR NEW
FORMATS, WE MAY NOT RECOUP ASSOCIATED LAUNCH COSTS OR ACHIEVE PROFITABILITY FOR
STATIONS BROADCASTING IN THESE FORMATS.



     We have launched music formats, including a contemporary Christian music
format called The Fish(TM), as well as a conservative news/talk format, in
several markets. We have traditionally relied on Christian teaching and talk
block programming as the primary source of our revenue and there is no guarantee
that the implementation of these new formats will attract a sufficient listener
and advertiser base. Our strategy to launch and develop new formats is unproven
and may not result in any significant revenues or net income. Our management may
be unable to successfully market these additional formats due to less
operational experience compared to Christian teaching and talk formats. In
addition, the introduction of these new formats involves significant promotional
costs which will negatively impact our profitability.



IF WE DO NOT MAINTAIN OR INCREASE OUR BLOCK PROGRAM REVENUE SHARE COMPARED TO
OTHER BROADCAST COMPANIES, OUR BUSINESS AND OPERATING RESULTS MAY BE ADVERSELY
AFFECTED.


     The financial success of each of our radio stations that features Christian
teaching and talk programming is dependent, to a significant degree, upon our
ability to generate revenue from the sale of block program time to national and
local religious organizations, which currently accounts for more than 40% of our
revenue. We compete for this program revenue with a number of commercial and
non-commercial radio stations. Due to the significant competition for this block
programming, we cannot be sure that we will be able to maintain or increase our
current block programming revenue.


IF WE ARE UNABLE TO MAINTAIN OR GROW OUR ADVERTISING REVENUE SHARE COMPARED TO
OTHER BROADCAST AND MEDIA COMPANIES, OUR BUSINESS AND OPERATING RESULTS MAY BE
ADVERSELY AFFECTED.



     In the advertising market, we compete for revenue with other commercial
religious format and general format radio stations, as well as with other media,
including broadcast and cable television, newspapers, magazines, direct mail and
billboard advertising. Our radio stations with our contemporary Christian music
and conservative news/talk formats are substantially dependent upon advertising
for their revenues. Due to this significant competition, we cannot be sure that
we will be able to maintain or increase our current advertising revenue.


A GENERAL ECONOMIC DOWNTURN COULD NEGATIVELY IMPACT OUR ABILITY TO GENERATE
ADVERTISING REVENUE.

     We derive a substantial part of our revenues from the sale of advertising
on our radio stations. For the years ended December 31, 2000, 1999 and 1998,
40.5%, 37.3% and 35.8% of our broadcast revenues, respectively, were generated
from the sale of advertising. Because advertisers generally reduce their
spending during economic downturns, we could be adversely affected by a national
recession. In addition, because a substantial portion of our revenues are
derived from local advertisers, our ability to generate advertising revenues in
specific markets could be adversely affected by local or regional economic
downturns. We are particularly dependent on advertising revenue from the Los
Angeles, Dallas and New York markets, which generated 7.1%, 4.0% and 2.1%,
respectively, of our gross broadcast revenues in 2000.


ACTS OF WAR AND TERRORISM MAY REDUCE OUR ADVERTISING REVENUE AND HAVE OTHER
NEGATIVE EFFECTS ON OUR BUSINESS.


     In response to the September 11, 2001 terrorist attacks on New York City
and Washington, D.C., we increased our news and community service programming,
which decreased the amount of broadcast time available for commercial
advertising. In addition, these events caused advertisers to cancel
advertisements

                                        18


on our stations. Acts of war and terrorism against the United States, and the
country's response thereto, may also cause a general slowdown in the U.S.
advertising market, which could cause our advertising revenues to decline due to
advertising cancellations, delays or defaults in payment for advertising time,
and other factors. In addition, these events may have other negative effects on
our business, the nature and duration of which we cannot predict.


IF WE LOSE THE SERVICES OF OUR FOUNDERS, THE MANAGEMENT AND OPERATION OF OUR
BUSINESS COULD BE DISRUPTED.


     Our business is dependent upon the performance and continued efforts of
certain key individuals, particularly Edward G. Atsinger III, our President and
Chief Executive Officer, and Stuart W. Epperson, our Chairman of the Board. The
loss of the services of either Messrs. Atsinger or Epperson could have a
material adverse effect upon us. We have entered into employment agreements with
each of Messrs. Atsinger and Epperson. Messrs. Atsinger and Epperson's
agreements expire in June 2004. Mr. Epperson has radio interests outside of us
that will continue to impose demands on his time. See "Related Party
Transactions -- Radio Stations Owned by Our Principal Stockholders."

OUR MANAGEMENT MAY BE RESPONSIBLE FOR MANAGING OTHER RADIO OPERATIONS WHICH
COULD GIVE RISE TO CONFLICTS OF INTEREST AND IMPAIR OUR OPERATING RESULTS.


     Through its subsidiaries, Salem Communications Corporation currently owns 9
radio stations and may from time to time in the future acquire radio stations in
addition to those owned by Salem Holding and its subsidiaries. Our officers and
managers (many of whom are also officers or managers of Salem Holding) may have
a substantial role in managing these radio stations. As a result, the time they
devote to managing Salem Holding's radio stations may be correspondingly
reduced. This could adversely affect Salem Holding's growth, financial condition
and results of operations. Moreover, allocating managers' time and other
resources of Salem Holding between Salem Holding's radio stations and radio
stations that are not owned by Salem Holding or its subsidiaries could give rise
to conflicts of interest. We do not have or plan to create formal procedures for
determining whether and to what extent properties acquired in the future will be
allocated between Salem Holding and Salem Communications Corporation (including
their respective subsidiaries) or which properties will receive priority with
respect to personnel requirements.



OUR CONTROLLING STOCKHOLDERS MAY CAUSE US TO ENGAGE IN TRANSACTIONS THAT
CONFLICT WITH YOUR INTERESTS AS A NOTE HOLDER.


     Edward G. Atsinger III, Stuart W. Epperson and Nancy A. Epperson control
approximately 88% of the voting power of Salem Communications Corporation's
capital stock. Accordingly, these stockholders control Salem Communications
Corporation. Salem Communications Corporation, in turn, controls Salem Holding.
Messrs. Atsinger and Epperson and Mrs. Epperson thus have the ability to control
fundamental corporate transactions requiring equity holder approval, including
but not limited to, the election of all of Salem Communications Corporation's
directors, except for two independent directors, approval of merger transactions
involving Salem Communications Corporation and the sale of all or substantially
all of Salem Communications Corporation's assets. The interests of Messrs.
Atsinger and Epperson and Mrs. Epperson as equity holders may differ
significantly from your interests as creditors.


IF WE FAIL TO MAINTAIN OUR LICENSES WITH THE FCC, WE COULD BE PREVENTED FROM
OPERATING AFFECTED RADIO STATIONS.


     We operate each of our radio stations pursuant to one or more FCC
broadcasting licenses. As each license expires, we apply for renewal of the
license. However, we cannot be sure that any of our licenses will be renewed,
and renewal is subject to challenge by third-parties or to denial by the FCC.
The Communications Act of 1934 and FCC rules and policies require prior FCC
approval for transfers of control of, and assignments of, FCC licenses. Were a
complaint to be filed against us or other FCC licensees involved in a
transaction with us, the FCC could delay the grant of, or refuse to grant, its
consent to an assignment or transfer of control of licenses and effectively
prohibit a proposed acquisition or disposition. The failure to renew any of our
licenses could prevent us from operating the affected station
                                        19


and generating revenue from it. If the FCC decides to include conditions or
qualifications in any of our licenses, we may be limited in the manner in which
we may operate the affected station.


IF WE DO NOT SUCCESSFULLY DEFEND THE GOSPEL COMMUNICATIONS INTERNATIONAL CLAIMS,
OUR BUSINESS AND OPERATING RESULTS MAY BE ADVERSELY AFFECTED.


     In December 2000, Gospel Communications International, Inc. made a demand
for arbitration upon us. The demand, pending before an arbitration panel of the
American Arbitration Association, alleges, among other things, we and our
subsidiary OnePlace failed to provide certain e-commerce software to Gospel
Communications International pursuant to a written contract between Gospel
Communications International and OnePlace. Gospel Communications International
seeks $10.0 million in damages for its claims. Although we will defend the
action and pursue counterclaims against Gospel Communications International,
there can be no assurance that the Gospel Communications International matter
will be resolved in our favor and the ultimate resolution of this matter may
adversely affect our business and operating results. See "Business -- Legal
Proceedings" for additional information.


IF WE DO NOT CONSUMMATE QUALIFYING TRANSACTIONS, WE MAY BE UNABLE TO REALIZE THE
FULL TAX BENEFIT FROM A LIKE-KIND EXCHANGE.


     We have structured the exchange of certain radio station assets, including
the exchange of the assets of our radio stations WHK-FM (Canton, Ohio) and
WHKK-AM (formerly named WHK-AM, Cleveland, Ohio) for the assets of radio station
WCLV-FM (Cleveland, Ohio) in July 2001, as a tax-deferred like-kind exchange.
Pursuant to Section 1031 of the Internal Revenue Code and Treasury Regulations
promulgated thereunder, we have 180 days from the disposition of the WHK-FM and
WHKK-AM assets to acquire like-kind replacement assets. Although we intend to
consummate several associated replacement property transactions in accordance
with the Internal Revenue Code and Treasury Regulations promulgated thereunder,
circumstances, including those beyond our control or other competing business
purposes of ours may limit or prohibit our ability to close some or all of the
replacement property transactions in accordance with Treasury Regulations. This
could result in a potential net tax liability of up to approximately $13
million.

                                        20


                               THE EXCHANGE OFFER

PURPOSE AND EFFECT OF THE EXCHANGE OFFER

     In connection with the sale of the old notes, we entered into a
registration rights agreement with the initial purchasers of the old notes,
pursuant to which we agreed to file and to use our best efforts to cause to
become effective with the Commission a registration statement with respect to
the exchange of the old notes for exchange notes with terms identical in all
material respects to the terms of the old notes. A copy of the registration
rights agreement has been filed as an exhibit to the registration statement of
which this prospectus is a part. The exchange offer is being made to satisfy our
obligations under the registration rights agreement.

     By tendering old notes for exchange notes, each holder represents to us
that:

     - any exchange notes to be received by such holder are being acquired in
       the ordinary course of such holder's business;

     - such holder has no arrangement or understanding with any person to
       participate in a distribution (within the meaning of the Securities Act)
       of exchange notes;

     - such holder is not an "affiliate" of Salem Holding, as the term is
       defined in Rule 144A under the Securities Act;

     - such holder has full power and authority to tender, exchange, sell,
       assign and transfer the tendered old notes;

     - we will acquire good, marketable and unencumbered title to the tendered
       old notes, free and clear of all liens, restrictions, charges and
       encumbrances; and

     - the old notes tendered for exchange notes are not subject to any adverse
       claims or proxies.

     Each tendering holder also warrants and agrees that it will, upon request,
execute and deliver any additional documents deemed by us or the exchange agent
to be necessary or desirable to complete the exchange, sale, assignment and
transfer of the old notes tendered pursuant to the exchange offer. Each
broker-dealer that receives exchange notes for its own account in exchange for
old notes pursuant to the exchange offer, where such old notes were acquired by
such broker-dealer as a result of market-making or other trading activities,
must acknowledge that it will deliver a prospectus in connection with any resale
of such exchange notes. See "Plan of Distribution."

     The exchange offer is not being made to, nor will we accept tenders for
exchange from, holders of old notes in any jurisdiction in which the exchange
offer or the acceptance of the exchange notes would be in violation of
securities or blue sky laws of that jurisdiction.

     Unless the context requires otherwise, the term "holder" with respect to an
exchange offer means any person in whose name the old notes are registered on
the books of Salem Holding or any other person who has obtained a properly
completed bond power from the registered holder, or any participant in DTC whose
name appears on a security position listing as a holder of old notes (which, for
purposes of the exchange offer, include beneficial interests in old notes held
by direct or indirect participants in DTC and old notes held in definitive
form).

TERMS OF THE EXCHANGE OFFER

     Salem Holding hereby offers, upon the terms and conditions described in
this prospectus and in the accompanying letter of transmittal, to exchange
$1,000 principal amount of the 9% senior subordinated exchange notes due 2011
for each $1,000 principal amount of the old 9% senior subordinated notes due
2011, properly tendered before the expiration date and not validly withdrawn
according to the procedures described below. Holders may tender their old notes
in whole or in part in integral multiples of $1,000 principal amount.

                                        21


     The form and terms of the exchange notes are the same as the form and terms
of the old notes, except that:

          (1) the exchange notes have been registered under the Securities Act
     and therefore are not subject to the restrictions on transfer applicable to
     the old notes, and

          (2) holders of the exchange notes will not be entitled to some of the
     rights of holders of the old notes under the registration rights agreement.

     The exchange notes evidence the same indebtedness as the old notes (which
they replace) and will be issued pursuant to, and entitled to the benefits of,
the indenture.

     The exchange offer is not conditioned upon any minimum principal amount of
old notes being tendered for exchange. Salem Holding reserves the right in its
reasonable discretion to purchase or make offers for any old notes that remain
outstanding after the expiration date or, as described under "Conditions to the
Exchange Offer," to terminate the exchange offer and, to the extent permitted by
applicable law, purchase old notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers could
differ from the terms of the exchange offer. As of date of this prospectus,
$150.0 million principal amount of the old notes is outstanding.

     Holders of the old notes do not have any appraisal or dissenters' rights in
connection with the exchange offer. Old notes that are not tendered for, or are
tendered but not accepted in connection with, the exchange offer will remain
outstanding. See "Risk Factors -- You must comply with the procedures for the
exchange offer in order to receive the exchange notes."

     If any tendered old notes are not accepted for exchange because of an
invalid tender, the occurrence of particular other events described in this
prospectus or otherwise, certificates for any such unaccepted old notes will be
returned, without expense, to the tendering holder thereof promptly after the
expiration date.

     Holders who tender old notes in connection with the exchange offer will not
be required to pay brokerage commissions or fees or, subject to the instructions
in the letter of transmittal, transfer taxes with respect to the exchange of the
old notes in connection with the exchange offer. Salem Holding will pay certain
charges and expenses, other than specified applicable taxes. See "-- Fees and
Expenses."

     SALEM HOLDING MAKES NO RECOMMENDATION TO THE HOLDERS OF THE OLD NOTES AS TO
WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OLD
NOTES IN THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY
SUCH RECOMMENDATION. HOLDERS OF THE OLD NOTES MUST MAKE THEIR OWN DECISION AS TO
WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER, AND, IF SO, THE AGGREGATE
AMOUNT OF OLD NOTES TO TENDER, AFTER READING THIS PROSPECTUS AND THE LETTER OF
TRANSMITTAL AND CONSULTING WITH THEIR ADVISORS, IF ANY, BASED ON THEIR FINANCIAL
POSITIONS AND REQUIREMENTS.

EXPIRATION DATE; EXTENSIONS; AMENDMENTS

     The expiration date for the exchange offer is 5:00 p.m. New York City time,
on             , 2001, unless Salem Holding, in its reasonable discretion,
extends the exchange offer. If Salem Holding does extend the exchange offer, the
expiration date will be the latest date and time to which the exchange offer is
extended.

     Salem Holding expressly reserves the right, subject to applicable law, at
any time and from time to time:

     - to terminate the exchange offer if it determines, in its reasonable
       discretion, that any of the events or conditions referred to under
       "-- Conditions to the Exchange Offer" has occurred or exists or has not
       been satisfied;

                                        22


     - to extend the expiration date and retain all old notes tendered pursuant
       to the exchange offer, subject, however, to the right of holders of old
       notes to withdraw their tendered old notes as described under
       "-- Withdrawal of Tenders"; and

     - to waive any condition or otherwise amend the terms of the exchange offer
       in any respect.

     If Salem Holding amends the exchange offer in a manner it determines
constitutes a material change, or if it waives a material condition of the
exchange offer, it will promptly disclose such material amendment by means of a
prospectus supplement that will be distributed to the registered holders of the
affected old notes, and it will extend the exchange offer to the extent required
by Rule 14e-1 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").

     Any such extension, termination or amendment will be followed as promptly
as possible by oral or written notice to the exchange agent (any such oral
notice to be promptly confirmed in writing) and by making a public announcement,
and such announcement in the case of an extension will be made no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled expiration date. Without limiting the manner in which we may choose to
make any public announcement, and subject to applicable laws, Salem Holding will
have no obligation to publish, advertise, or otherwise communicate any such
public announcement, other than by making a timely release to an appropriate
news agency.

ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE NOTES

     Upon the terms and subject to the conditions of the exchange offer, Salem
Holding will exchange, and will issue to the exchange agent, exchange notes for
old notes validly tendered and not withdrawn (pursuant to the withdrawal rights
described under "-- Withdrawal of Tenders") promptly after the expiration date.

     In all cases, delivery of exchange notes in exchange for old notes tendered
and accepted for exchange pursuant to the exchange offer will be made only after
timely receipt by the exchange agent of:

          (1) old notes or a book-entry confirmation of a book-entry transfer of
     old notes into the exchange agent's account at DTC;

          (2) the letter of transmittal (or facsimile thereof), properly
     completed and duly executed, with any required signature guarantees; and

          (3) any other documentation required by the letter of transmittal.

     Accordingly, the delivery of the exchange notes might not be made to all
tendering holders at the same time, and will depend upon when old notes,
book-entry confirmations with respect to old notes and other required documents
are received by the exchange agent.

     The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of old notes into the exchange agent's account at DTC.

     Subject to the terms and conditions of the exchange offer, Salem Holding
will be deemed to have accepted for exchange, and thereby exchanged, old notes
validly tendered and not withdrawn as, if and when it gives oral or written
notice to the exchange agent (and such oral notice to be promptly confirmed in
writing) of its acceptance of such old notes for exchange pursuant to the
exchange offer. Salem Holding's acceptance for exchange of old notes tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and Salem Holding upon the terms and
subject to the conditions of the exchange offer. The exchange agent will act as
agent for Salem Holding for the purpose of receiving tenders of old notes,
letters of transmittal and related documents and transmitting exchange notes to
holders who have validly tendered old notes. Such exchange will be made promptly
after the expiration date of the exchange offer. If for any reason the exchange
of any old notes tendered pursuant to the exchange offer is delayed (whether
before or after our acceptance for exchange of old notes), or Salem Holding
extends the exchange offer or is unable to accept for exchange or exchange

                                        23


old notes tendered pursuant to the exchange offer, then, without prejudice to
our rights set forth in this prospectus and in the letter of transmittal, the
exchange agent may, nevertheless, on Salem Holding's behalf and subject to Rule
14e-1(c) under the Exchange Act, retain tendered old notes and such old notes
may not be withdrawn except to the extent tendering holders are entitled to
withdrawal rights as described under "Withdrawal of Tenders."

PROCEDURES FOR TENDERING OLD NOTES

  VALID TENDER

     Except as set forth below, in order for old notes to be validly tendered
pursuant to the exchange offer, either:

          (1) (a) a properly completed and duly executed letter of transmittal
     (or facsimile thereof), with any required signature guarantees and any
     other required documents, must be received by the exchange agent at the
     address set forth under "Exchange Agent" prior to the expiration date, and
     (b) tendered old notes must be received by the exchange agent, or such old
     notes must be tendered pursuant to the procedures for book-entry transfer
     set forth below and a book-entry confirmation must be received by the
     exchange agent, in each case prior to the expiration date; or

          (2) the guaranteed delivery procedures set forth below must be
     complied with.

     If less than all of the old notes are tendered, a tendering holder should
fill in the amount of old notes being tendered in the appropriate box on the
letter of transmittal. The entire amount of old notes delivered to the exchange
agent will be deemed to have been tendered unless otherwise indicated.

     If any letter of transmittal, endorsement, bond power, power of attorney or
any other document required by the letter of transmittal is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person
should so indicate when signing. Unless waived by Salem Holding, evidence
satisfactory to it of such person's authority to so act must also be submitted.

     Any beneficial owner of old notes that are held by or registered in the
name of a broker, dealer, commercial bank, trust company or other nominee or
custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the exchange offer.

     The method of delivery of old notes, the letter of transmittal and all
other required documents is at the option and sole risk of the tendering holder.
Delivery will be deemed made only when actually received by the exchange agent.
Instead of delivery by mail, it is recommended that holders use an overnight or
hand delivery service. In all cases, sufficient time should be allowed to assure
timely delivery and proper insurance should be obtained. No letter of
transmittal or old notes should be sent to Salem Holding. Holders may request
their respective brokers, dealers, commercial banks, trust companies or nominees
to effect these transactions for them.

  BOOK-ENTRY TRANSFER

     The exchange agent will make a request to establish an account with respect
to the applicable old notes at DTC for purposes of the exchange offer within two
business days after the date of this prospectus. Any financial institution that
is a participant in DTC's Book-Entry Transfer Facility system may make
book-entry delivery of the old notes by causing DTC to transfer the old notes
into the exchange agent's account via the ATOP system in accordance with DTC's
transfer procedure. Although delivery of old notes may be effected through
book-entry transfer into the exchange agent's account at DTC, the letter of
transmittal (or facsimile thereof), properly completed and duly executed, any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received or confirmed by the exchange agent at its
addresses in this prospectus prior to 5:00 p.m., New York City time, on the
expiration date, or the guaranteed delivery procedure set forth below must be
complied with.

                                        24


DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.

  SIGNATURE GUARANTEES

     Certificates for old notes need not be endorsed and signature guarantees on
a letter of transmittal or notice of withdrawal, as the case may be, are
unnecessary unless:

          (1) a certificate for old notes is registered in the name other than
     that of the person surrendering the certificate; or

          (2) a registered holder completes the box entitled "Special Issuance
     Instructions" or "Special Delivery Instructions" on the letter of
     transmittal.

     In the case of (1) or (2) above, such certificates for old notes must be
duly endorsed or accompanied by a properly executed bond power, with the
endorsement or signature on the bond power and on the letter of transmittal or
the notice of withdrawal, as the case may be, guaranteed by a firm or other
entity identified in Rule 17Ad-15 under the Exchange Act as an "eligible
guarantor institution," including (as such terms are defined therein): (a) a
bank, (b) a broker, dealer, municipal securities broker or dealer or government
securities broker or dealer, (c) a credit union, (d) a national securities
exchange, registered securities association or clearing agency, or (e) a savings
association that is a participant in a Securities Transfer Association. See
Instruction 1 to the letter of transmittal.

  GUARANTEED DELIVERY

     If a holder desires to tender old notes pursuant to the exchange offer and
the certificates for such old notes are not immediately available or time will
not permit all required documents to reach the exchange agent prior to the
expiration date, or the procedures for book-entry transfer cannot be completed
on a timely basis, such old notes may nevertheless be tendered, provided that
all of the following guaranteed delivery procedures are complied with:

          (1) such tenders are made by or through an eligible guarantor
     institution;

          (2) prior to the expiration date, the exchange agent receives from an
     eligible guarantor institution a properly completed and duly executed
     Notice of Guaranteed Delivery, substantially in the form accompanying the
     letter of transmittal, setting forth the name and address of the holder of
     the old notes and the amount of old notes tendered, stating that the tender
     is being made thereby and guaranteeing that, within three business days
     after the date of execution of the Notice of Guaranteed Delivery, the
     certificates for all physically tendered old notes, in proper form for
     transfer, or a book-entry confirmation, as the case may be, and any other
     documents required by the letter of transmittal, will be deposited by the
     eligible guarantor institution with the exchange agent. The Notice of
     Guaranteed Delivery may be delivered by hand, or transmitted by facsimile
     or mail to the exchange agent and must include a guarantee by an eligible
     guarantor institution in the form set forth in the Notice of Guaranteed
     Delivery; and

          (3) the certificates (or book-entry confirmation) representing all
     tendered old notes, in proper form for transfer, together with a properly
     completed and duly executed letter of transmittal, with any required
     signature guarantees and any other documents required by the letter of
     transmittal, are received by the exchange agent within three business days
     after the date of execution of the Notice of Guaranteed Delivery.

  SALEM HOLDING DETERMINATIONS FINAL

     All questions as to the form of documents, validity, eligibility, including
time of receipt, and acceptance for exchange of any tendered old notes will be
determined by Salem Holding, which determination will be final and binding on
all parties. Salem Holding reserves the right to reject any and all tenders it
reasonably determines not to be in proper form or the acceptance for exchange of
which may, in the view of our counsel, be unlawful. Salem Holding also reserves
the right, subject to applicable law, to

                                        25


waive any of the conditions of the exchange offer as set forth under "Conditions
to the Exchange Offer" or any defect or irregularity in any tender of old notes
of any particular holder, whether or not similar defects or irregularities are
waived in the case of other holders.

     Salem Holding's reasonable interpretation of the terms and conditions of
the exchange offer (including the letter of transmittal and its instructions)
will be final and binding upon all parties. No tender of old notes will be
deemed to have been validly made until all defects or irregularities with
respect to such tender have been cured or waived. None of Salem Holding, any of
its affiliates, the exchange agent or any other person will be under any duty to
give any notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification.

RESALE OF THE EXCHANGE NOTES

     Based on previous interpretations by the staff of the Commission set forth
in no-action letters issued to third parties, we believe that the exchange notes
issued in the exchange offer may be offered for resale, resold and otherwise
transferred without compliance with the registration and prospectus delivery
provisions of the Securities Act. This would not apply, however, to any holder
that is a broker-dealer that acquired old notes as a result of market-making
activities or other trading activities or directly from Salem Holding for resale
under an available exemption under the Securities Act. Also, resale would only
be permitted for exchange notes that (1) are acquired in the ordinary course of
a holder's business, (2) where such holder has no arrangement or understanding
with any person to participate in the distribution of such exchange notes, and
(3) such holder is not an "affiliate" of Salem Holding. The staff of the
Commission has not considered the exchange offer in the context of a no-action
letter, and there can be no assurance that the staff of the Commission would
make a similar determination with respect to the exchange offer. Each
broker-dealer that receives exchange notes for its own account in exchange for
old notes, where the old notes were acquired by that broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of the exchange
notes. See "Plan of Distribution." In order to facilitate the disposition of
exchange notes by broker-dealers participating in the exchange offer, we have
agreed, subject to specific conditions, to make this prospectus, as it may be
amended or supplemented from time to time, available for delivery by those
broker-dealers to satisfy their prospectus delivery obligations under the
Securities Act.

     In the event that our belief regarding resale is inaccurate, those who
transfer exchange notes in violation of the prospectus delivery provisions of
the Securities Act and without an exemption from registration under the federal
securities laws may incur liability under these laws. We do not assume, nor will
we indemnify you against, this liability. The exchange offer is not being made
to, nor will Salem Holding accept surrenders for exchange from, holders of old
notes in any jurisdiction in which the exchange offer or the acceptance thereof
would not be in compliance with the securities or blue sky laws of the
particular jurisdiction.

WITHDRAWAL OF TENDERS

     Except as otherwise provided in this prospectus, tenders of old notes may
be withdrawn at any time prior to 5:00 p.m., New York City time, on the
expiration date.

     In order to withdraw a tender of old notes in the exchange offer, a written
or facsimile transmission notice of withdrawal must be received by the exchange
agent at the address given under "-- Exchange Agent" prior to 5:00 p.m., New
York City time, on the expiration date. Any notice of withdrawal must:

     - specify the name of the person having deposited the old notes to be
       withdrawn;

     - identify the old notes to be withdrawn, including the certificate number
       or numbers and principal amount of the old notes;

     - be signed by the depositor in the same manner as the original signature
       on the letter of transmittal by tendering the old notes, including any
       required signature guarantees, or be accompanied by

                                        26


       documents of transfer sufficient to permit the trustee of the old notes
       to register the transfer of the old notes into the name of the depositor
       withdrawing the tender; and

     - specify the name in which any old notes are to be registered, if
       different from that of the depositor.

     Any old notes that have been properly withdrawn will not be deemed validly
tendered for purposes of the exchange offer, but may be retendered by following
one of the procedures described above under "Procedures for Tendering Old Notes"
at any time prior to the expiration date.

     All questions as to the validity, form and eligibility, including time of
receipt, of any withdrawal notices will be determined by Salem Holding in its
reasonable discretion, and will be final and binding on all parties. Neither
Salem Holding, nor any of its affiliates, the exchange agent or any other person
will be under any duty to give any notification of any defects or irregularities
in any notice of withdrawal or incur any liability for failure to give any such
notification. Any tendered old notes that have been properly withdrawn will be
returned to the holder promptly after withdrawal.

INTEREST ON THE EXCHANGE NOTES

     The exchange notes will bear interest from the issue date of the old notes
(June 25, 2001) and such interest will be paid on January 1, 2002. Interest on
the old notes accepted for exchange will cease to accrue upon issuance of the
exchange notes and will be superceded by the interest payable with respect to
the exchange notes.

     The exchange notes will bear interest at a rate of 9% per annum. Interest
on the exchange notes will be payable semi-annually, in arrears, on each January
1 and July 1 following the consummation of the exchange offer. Untendered old
notes that are not exchanged for exchange notes pursuant to the exchange offer
will continue to bear interest at a rate of 9% per annum.

CONDITIONS TO THE EXCHANGE OFFER

     Notwithstanding any other provision of the exchange offer, Salem Holding
shall not be required to accept for exchange, or to issue any exchange notes in
exchange for, any old notes, and may terminate or amend the exchange offer if,
at any time before the expiration date, Salem Holding reasonably determines that
the exchange offer violates applicable law, an applicable interpretation of the
staff of the Commission or any order of any governmental agency or court of
competent jurisdiction.

     The foregoing conditions are for the sole benefit of Salem Holding and may
be asserted by Salem Holding regardless of the circumstances giving rise to any
such condition or may be waived by Salem Holding in whole or in part at any time
and from time to time in its reasonable discretion. The failure by Salem Holding
at any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time.

     In addition, Salem Holding will not accept for exchange any old notes
tendered, and no exchange notes will be issued in exchange for any such old
notes, if at such time any stop order shall be threatened or in effect with
respect to the registration statement of which this prospectus constitutes a
part or the qualification of the indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). In any such event, Salem Holding
is required to use its reasonable best efforts to obtain the withdrawal of any
stop order at the earliest possible time.

EXCHANGE AGENT

     The Bank of New York has been appointed as exchange agent for the exchange
offer. Delivery of the letter of transmittal and any other required documents,
questions, requests for assistance and requests for

                                        27


additional copies of this prospectus or of the letter of transmittal should be
directed to the exchange agent addressed as follows:
                          BY HAND, OVERNIGHT COURIER,
                     OR REGISTERED/CERTIFIED MAIL DELIVERY:
                              The Bank of New York
                               101 Barclay Street
                              Bond Redemption Unit
                                  Lobby Level
                               New York, NY 10286

                                 BY U.S. MAIL:
                              The Bank of New York
                                 P.O. Box 11265
                             Church Street Station
                         Fiscal Agencies Dept. 101B 7E
                               New York, NY 10286

DELIVERY TO OTHER THAN THE ABOVE ADDRESSES OR FACSIMILE NUMBER WILL NOT
CONSTITUTE A VALID DELIVERY.

FEES AND EXPENSES

     We will bear the expenses of soliciting tenders pursuant to the exchange
offer. The principal solicitation for tenders pursuant to the exchange offer is
being made by mail. Additional solicitations may be made by our officers and
regular employees and our affiliates in person, by telegraph or by telephone.

     We have not retained any dealer-manager or similar agent in connection with
the exchange offer and will not make any payments to brokers, dealers or other
persons soliciting acceptances of the exchange offer. We will, however, pay the
exchange agent reasonable customary fees for its services and will reimburse the
exchange agent for its reasonable out-of-pocket expenses in connection with this
exchange offer. We may also pay brokerage houses and other custodians, nominees
and fiduciaries the reasonable out-of-pocket expenses they incur in forwarding
copies of this prospectus, letters of transmittal and related documents to the
beneficial owners of the old notes and in handling or forwarding tenders for
exchange.

     We will pay the fees and expenses incurred in connection with the exchange
offer for the exchange agent and the trustee, as well as our accounting and
legal services.

     We will pay all transfer taxes, if any, applicable to the exchange of old
notes pursuant to the exchange offer. The amount of these transfer taxes,
whether imposed on the registered holder or any other persons, will be payable
by the tendering holder if:

     - certificates representing exchange notes or old notes not tendered or
       accepted for exchange are to be delivered to, or are to be registered or
       issued in the name of, any person other than the registered holder of the
       old notes tendered;

     - tendered old notes are registered in the name of any person other than
       the person signing the letter of transmittal; or

     - a transfer tax is imposed for any reason other than the exchange of old
       notes pursuant to the exchange offer.

     If satisfactory evidence of payment of, or exemption from, these taxes is
not submitted with the letter of transmittal, the amount of these transfer taxes
will be billed directly to the tendering holder.

ACCOUNTING TREATMENT

     The exchange notes will be recorded at the same carrying value as the old
notes, which is face value, as reflected in our accounting records on the date
of the exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by us upon the consummation of the exchange offer. The expenses of
the exchange offer will be amortized by us over the term of the exchange notes
under generally accepted accounting principles.

                                        28


                                USE OF PROCEEDS

     The exchange offer is intended to satisfy certain of our obligations under
the registration rights agreement. We will not receive any proceeds from the
issuance of the exchange notes or the closing of the exchange offer.

     In consideration for issuing the exchange notes as contemplated in this
prospectus, we will receive, in exchange, an equal number of old notes in like
principal amount. The form and terms of the exchange notes are identical in all
material respects to the form and term of the old notes, except as otherwise
described in "The Exchange Offer -- Terms of the Exchange Offer." The old notes
surrendered in exchange of the exchange notes will be retired and canceled and
cannot be reissued. The proceeds from the offering of the old notes have been
used to repay the $145.5 million in revolving loans outstanding under our credit
facility and accrued interest thereon. See "Description of Existing
Indebtedness" for additional information.

                                 CAPITALIZATION

     The following table sets forth unaudited historical consolidated
capitalization of Salem Holding as of June 30, 2001 and as of that date on a pro
forma basis for the use of proceeds from the Settlement to repay borrowings
under the credit facility, as if the use of the Settlement proceeds occurred on
June 30, 2001.



                                                               AS OF JUNE 30, 2001
                                                              ---------------------
                                                               ACTUAL     PRO FORMA
                                                              --------    ---------
                                                                 (IN THOUSANDS)
                                                                    
Cash and cash equivalents...................................  $  3,420    $    662
                                                              ========    ========
Long-term debt (including current maturities)
  Credit facility(1)........................................  $ 52,342    $ 49,584
  9 1/2% senior subordinated notes due 2007.................   100,000     100,000
  9% senior subordinated notes due 2011.....................   150,000     150,000
  Seller notes for acquisition..............................     1,250       1,250
                                                              --------    --------
          Total long-term debt..............................   303,592     300,834
Stockholder's equity........................................   146,187     146,187
                                                              --------    --------
          Total capitalization..............................  $449,779    $447,021
                                                              ========    ========


-------------------------
(1) As of June 30, 2001, on a pro forma basis, Salem Holding would be permitted
    to incur an additional $54.7 million under the credit facility, based upon
    the financial covenant restrictions of the credit facility.

                                        29


                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

     The selected consolidated financial and other data presented below as of
and for the five years ended December 31, 2000 have been derived from the
audited consolidated financial statements of Salem Communications Corporation
("Parent") (see also Note 12 thereto with respect to Salem Holding). The
selected consolidated financial and other data as of and for the six months
ended June 30, 2000 and 2001 have been derived from Parent's unaudited condensed
consolidated financial statements (see also Note 12 thereto with respect to
Salem Holding) and include all adjustments, consisting only of normal recurring
adjustments, which are, in our opinion, necessary for a fair presentation of our
financial position at such dates and results of operations for such periods. The
results of operations for the six months ended June 30, 2001 are not necessarily
indicative of the results of the full year. The selected consolidated financial
and other data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements of Parent and the notes thereto included
elsewhere in this prospectus (except for the consolidated financial statements
as of and for the years ended December 31, 1996 and 1997, which are not included
in this prospectus).



                                                                  PARENT
                         -----------------------------------------------------------------------------------------
                                                                                                 SIX MONTHS
                                             YEAR ENDED DECEMBER 31,                           ENDED JUNE 30,
                         ---------------------------------------------------------------   -----------------------
                            1996          1997         1998         1999         2000         2000         2001
                         -----------   ----------   ----------   ----------   ----------   ----------   ----------
                                                          (DOLLARS IN THOUSANDS)
                                                                                   
STATEMENT OF OPERATIONS
  DATA:
Net broadcasting
  revenue..............  $    59,010   $   67,912   $   77,891   $   87,122   $  110,097   $   47,427   $   63,975
Other media revenue....           --           --           --        6,424        7,916        3,797        4,068
                         -----------   ----------   ----------   ----------   ----------   ----------   ----------
Total revenue..........       59,010       67,912       77,891       93,546      118,013       51,224       68,043
Operating expenses:
  Broadcasting
    operating
    expenses...........       33,463       39,626       42,526       46,291       60,714       26,211       41,091
  Other media operating
    expenses...........           --           --           --        9,985       14,863        8,115        5,016
  Corporate expenses...        4,663        6,210        7,395        8,507       10,457        5,272        7,235
  Stock and related
    cash grant.........           --           --           --        2,550           --           --           --
  Tax reimbursements to
    S corporation
    shareholders(2)....        2,038        1,780           --           --           --           --           --
  Depreciation and
    amortization.......        8,394       12,803       14,058       18,233       25,479       10,338       15,233
                         -----------   ----------   ----------   ----------   ----------   ----------   ----------
Total operating
  expenses.............       48,558       60,419       63,979       85,566      111,513       49,936       68,575
                         -----------   ----------   ----------   ----------   ----------   ----------   ----------
Net operating income...       10,452        7,493       13,912        7,980        6,500        1,288         (532)
Other income (expense):
  Interest income......          523          230          291        1,005          534          351        1,554
  Interest income from
    related party......           --           --           --           --           --           --           --
  Gain (loss) on
    disposal of
    assets.............       16,064        4,285          236         (219)         773        4,408        2,518
  Gain on sale of
    assets to related
    party..............           --           --           --           --       28,794           --           --
  Interest expense.....       (7,361)     (12,706)     (15,941)     (14,219)     (17,452)      (5,219)     (12,749)
  Other expense........         (270)        (389)        (422)        (633)        (857)        (420)        (162)
                         -----------   ----------   ----------   ----------   ----------   ----------   ----------
Total other income
  (expense)............        8,956       (8,580)     (15,836)     (14,066)      11,792         (880)      (8,839)
                         -----------   ----------   ----------   ----------   ----------   ----------   ----------
Income (loss) before
  income taxes and
  extraordinary item...       19,408       (1,087)      (1,924)      (6,086)      18,292          408       (9,371)
Provision (benefit) for
  income taxes.........        6,655          106         (343)      (1,611)       6,996          464       (3,362)
                         -----------   ----------   ----------   ----------   ----------   ----------   ----------
Income (loss) before
  extraordinary item...       12,753       (1,193)      (1,581)      (4,475)      11,296          (56)      (6,009)
Extraordinary loss.....           --       (1,185)          --       (3,570)      (1,187)          --           --
                         -----------   ----------   ----------   ----------   ----------   ----------   ----------
Net income (loss)......  $    12,753   $   (2,378)  $   (1,581)  $   (8,045)  $   10,109   $      (56)  $   (6,009)
                         ===========   ==========   ==========   ==========   ==========   ==========   ==========


                              SALEM HOLDING(1)
                         --------------------------
                                            SIX
                             YEAR          MONTHS
                            ENDED          ENDED
                         DECEMBER 31,     JUNE 30,
                             2000           2001
                         ------------    ----------
                           (DOLLARS IN THOUSANDS)
                                   
STATEMENT OF OPERATIONS
  DATA:
Net broadcasting
  revenue..............   $  107,786     $   62,254
Other media revenue....        7,916             --
                          ----------     ----------
Total revenue..........      115,702         62,254
Operating expenses:
  Broadcasting
    operating
    expenses...........       60,121         40,107
  Other media operating
    expenses...........       14,863             --
  Corporate expenses...       10,457          7,235
  Stock and related
    cash grant.........           --             --
  Tax reimbursements to
    S corporation
    shareholders(2)....           --             --
  Depreciation and
    amortization.......       23,243         13,113
                          ----------     ----------
Total operating
  expenses.............      108,684         60,455
                          ----------     ----------
Net operating income...        7,018          1,799
Other income (expense):
  Interest income......          504             66
  Interest income from
    related party......        1,249          5,366
  Gain (loss) on
    disposal of
    assets.............          773          2,323
  Gain on sale of
    assets to related
    party..............       28,794             --
  Interest expense.....      (15,572)       (12,747)
  Other expense........         (856)          (112)
                          ----------     ----------
Total other income
  (expense)............       14,892         (5,104)
                          ----------     ----------
Income (loss) before
  income taxes and
  extraordinary item...       21,910         (3,305)
Provision (benefit) for
  income taxes.........        8,249         (1,366)
                          ----------     ----------
Income (loss) before
  extraordinary item...       13,661         (1,939)
Extraordinary loss.....           --             --
                          ----------     ----------
Net income (loss)......   $   13,661     $   (1,939)
                          ==========     ==========


                                        30




                                                                  PARENT
                         -----------------------------------------------------------------------------------------
                                                                                                 SIX MONTHS
                                             YEAR ENDED DECEMBER 31,                           ENDED JUNE 30,
                         ---------------------------------------------------------------   -----------------------
                            1996          1997         1998         1999         2000         2000         2001
                         -----------   ----------   ----------   ----------   ----------   ----------   ----------
                                                          (DOLLARS IN THOUSANDS)
                                                                                   
EARNINGS (LOSS) PER
  SHARE DATA:
Basic and diluted
  earnings (loss) per
  share before
  extraordinary item...  $      0.77   $    (0.07)  $    (0.09)  $    (0.22)  $     0.48   $     0.00   $    (0.26)
Extraordinary loss per
  share................           --        (0.07)          --        (0.18)       (0.05)          --           --
                         -----------   ----------   ----------   ----------   ----------   ----------   ----------
Basic and diluted
  earnings (loss) per
  share................  $      0.77   $    (0.14)  $    (0.09)  $    (0.40)  $     0.43   $     0.00   $    (0.26)
                         ===========   ==========   ==========   ==========   ==========   ==========   ==========
Basic weighted average
  shares outstanding...   16,661,088   16,661,088   16,661,088   20,066,006   23,456,088   23,456,088   23,456,088
Diluted weighted
  average shares
  outstanding..........   16,661,088   16,661,088   16,661,088   20,066,006   23,466,849   23,456,088   23,456,088
BALANCE SHEET DATA (AT
  END OF PERIOD):
Cash and cash
  equivalents..........  $     1,962   $    1,645   $    1,917   $   34,124   $    3,928   $    4,432   $   54,079
Intangible assets,
  net..................      106,231      120,083      141,776      150,520      358,482      187,342      300,640
Total assets...........      159,185      184,813      207,750      264,364      470,668      276,613      477,045
Long-term debt.........      121,790      154,500      178,610      103,335      286,143      113,092      302,967
Total stockholders'
  equity...............       20,354       10,682        9,101      142,839      152,948      142,783      146,939
RATIO OF EARNINGS TO
  FIXED CHARGES
  DATA(3):
Ratio of earnings to
  fixed charges........         3.2x         0.9x         0.9x         0.6x         1.9x         1.1x         0.3x
Pro forma ratio of
  earnings to fixed
  charges..............                                                             1.4x                      0.3x
Coverage deficiency....           --        1,086        1,924        6,086           --           --        9,371
Pro forma coverage
  deficiency...........                                                               --                    10,376
OTHER DATA:
Broadcast cash
  flow(4)..............  $    25,547   $   28,286   $   35,365   $   40,831   $   49,383   $   21,216   $   22,884
Broadcast cash flow
  margin...............         43.3%        41.7%        45.4%        46.9%        44.9%        44.7%        35.8%
EBITDA(4)..............       20,884       22,076       27,970       28,763       31,979       11,626       14,701
Broadcast EBITDA(4)....       20,884       22,076       27,970       32,324       38,926       15,944       15,649
Operating cash
  flow(5)..............       21,407       22,306       28,261       29,768       32,513       11,977       16,255
After-tax cash
  flow(4)..............       11,594       10,647       12,335       15,809       19,035        7,637        7,713
Cash paid during the
  period for
  interest.............        6,158        9,523       14,965       15,048       15,831        4,954       12,680
Capital expenditures...        6,982        7,512        6,865        9,142       14,804        5,800       11,755
Cash flows related to:
  Operating
    activities.........  $    10,495   $    7,314   $   11,015   $    8,204   $   10,712   $    7,177   $    3,750
  Investing
    activities.........      (18,923)     (26,326)     (31,762)     (35,159)    (219,848)     (46,927)      35,335
  Financing
    activities.........        9,383       18,695       21,019       59,162      178,940       10,058       11,066


                              SALEM HOLDING(1)
                         --------------------------
                                            SIX
                             YEAR          MONTHS
                            ENDED          ENDED
                         DECEMBER 31,     JUNE 30,
                             2000           2001
                         ------------    ----------
                           (DOLLARS IN THOUSANDS)
                                   
EARNINGS (LOSS) PER
  SHARE DATA:
Basic and diluted
  earnings (loss) per
  share before
  extraordinary item...
Extraordinary loss per
  share................
Basic and diluted
  earnings (loss) per
  share................
Basic weighted average
  shares outstanding...
Diluted weighted
  average shares
  outstanding..........
BALANCE SHEET DATA (AT
  END OF PERIOD):
Cash and cash
  equivalents..........   $    3,612     $    3,420
Intangible assets,
  net..................      262,209        248,098
Total assets...........      426,571        463,240
Long-term debt.........      286,143        303,592
Total stockholders'
  equity...............      124,700        146,187
RATIO OF EARNINGS TO
  FIXED CHARGES
  DATA(3):
Ratio of earnings to
  fixed charges........         3.0x           0.8x
Pro forma ratio of
  earnings to fixed
  charges..............         2.1x           0.7x
Coverage deficiency....           --          3,035
Pro forma coverage
  deficiency...........           --          4,311
OTHER DATA:
Broadcast cash
  flow(4)..............   $   47,665     $   22,148
Broadcast cash flow
  margin...............         44.2%          35.6%
EBITDA(4)..............       30,261         14,913
Broadcast EBITDA(4)....       37,208         14,913
Operating cash
  flow(5)..............       32,014         20,345
After-tax cash
  flow(4)..............       19,164         10,306
Cash paid during the
  period for
  interest.............       14,437         12,680
Capital expenditures...       14,804         10,933
Cash flows related to:
  Operating
    activities.........   $   12,628          7,034
  Investing
    activities.........     (173,527)       (13,472)
  Financing
    activities.........      130,387          6,338


-------------------------
(1)Selected consolidated financial and other data of Salem Holding as of and for
   the four years ended December 31, 1999 and as of and for the six months ended
   June 30, 2000 is identical to Parent's selected consolidated financial and
   other data for those periods because Parent formed Salem Holding as a
   wholly-owned subsidiary in May 2000 and assigned substantially all of its
   assets and liabilities to Salem Holding in August 2000. This transaction was
   accounted for as an exchange of assets among entities under common control
   and, accordingly, the assets exchanged have been recorded at their historical
   cost in a manner similar to the pooling of interest method of accounting. The
   selected financial data have been presented as if the transaction had
   occurred on January 1, 1996.

(2) Tax reimbursements to S corporation shareholders represent the income tax
    liabilities of Parent's principal stockholders created by the income of New
    Inspiration and Golden Gate, which were both S corporations prior

                                        31


to our August 1997 reorganization. Pro forma net income (loss) excludes tax
reimbursements to S corporation shareholders and includes a pro forma tax
provision at an estimated combined federal and state income tax rate of 40% as
     if the reorganization had occurred at the beginning of each period
     presented. In August 1997, New Inspiration and Golden Gate became
     wholly-owned subsidiaries of Parent. From this date, pretax income of New
     Inspiration and Golden Gate is included in Parent's computation of the
     income tax provision included in our consolidated statements of operations.

    The following table reflects the pro forma adjustments to historical net
    income for the periods prior to and including our August 1997
    reorganization:



                                                               1996       1997
                                                              -------    -------
                                                                   
Pro Forma Information:
Income (loss) before income taxes and extraordinary item as
  reported above............................................  $19,408    $(1,087)
Add back tax reimbursements to S corporation shareholders...    2,038      1,780
                                                              -------    -------
Pro forma income (loss) before income taxes and
  extraordinary item........................................   21,446        693
Pro forma provision (benefit) for income taxes..............    8,608        278
                                                              -------    -------
Pro forma income (loss) before extraordinary item...........   12,838        415
Extraordinary loss..........................................       --     (1,185)
                                                              -------    -------
Pro forma net income (loss).................................  $12,838    $  (770)
                                                              =======    =======



(3) For purposes of computing the ratio of earnings to fixed charges, "earnings"
    consist of income (loss) before income taxes and extraordinary item plus
    fixed charges, and "fixed charges" consist of interest expense plus an
    allocation of a portion of rent expense representing interest. The pro forma
    earnings to fixed charges ratio gives effect only to the issuance of the
    notes offered hereby and the repayment of borrowings under Salem Holding's
    credit facility as if each occurred at the beginning of each period
    presented. We have performed a calculation to impute the interest portion of
    rent expense by calculating the present value of all future rent payments
    and determining the portion of the annual payment that represents interest
    expense, which ranges between approximately 33% and 40% of rent expense.


(4) We define broadcast cash flow as net operating income, excluding other media
    revenue and other media operating expenses, before depreciation and
    amortization and corporate expenses. We define EBITDA as net operating
    income before depreciation and amortization. We define broadcast EBITDA as
    EBITDA excluding other media businesses. We define after-tax cash flow as
    income (loss) before extraordinary item minus gain (loss) on disposal of
    assets (net of income tax) plus depreciation and amortization. EBITDA,
    broadcast EBITDA and after-tax cash flow for the year ended December 31,
    1999 excludes a $2.6 million charge ($1.9 million, net of income tax) for a
    one-time stock grant concurrent with our initial public offering. Although
    broadcast cash flow, EBITDA, broadcast EBITDA and after-tax cash flow are
    not measures of performance calculated in accordance with generally accepted
    accounting principles, we believe that they are useful because they are
    measures widely used in the radio broadcast industry to evaluate a radio
    company's operating performance. However, you should not consider broadcast
    cash flow, EBITDA, broadcast EBITDA and after-tax cash flow in isolation or
    as substitutes for net income, cash flows from operating activities and
    other statement of operations or cash flows data prepared in accordance with
    generally accepted accounting principles as a measure of liquidity or
    profitability. These measures are not necessarily comparable to similarly
    titled measures employed by other companies.

(5) We define operating cash flow as consolidated net income (adjusted to
    exclude, among other things, net gains on dispositions of assets outside the
    ordinary course of business) plus specified net losses, taxes, interest
    expense, and depreciation, amortization and other non-cash charges, in
    accordance with the indentures governing the notes and the existing 9 1/2%
    notes. This includes accrued interest income.

                                        32


              UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
                          STATEMENTS OF SALEM HOLDING

     The following unaudited pro forma condensed consolidated financial
statements of Salem Holding give effect to the following transactions as further
described below:

     - The dividend to Parent of Salem Holding's publishing and Internet
       businesses (collectively, the "Dividend"), as hereafter described;

     - The August 24, 2000 acquisition of certain radio station assets from
       Clear Channel Communication, Inc. and AMFM Inc. affiliates and certain
       related transactions, as hereafter described;

     - Certain individually insignificant acquisitions of assets of in-format
       radio stations (i.e., radio station assets acquired where the station
       format is not changed immediately upon acquisition) and other
       dispositions;

     - Accrued interest income and expense relating to the November 7, 2000 loan
       of $48.3 million from Salem Holding to Parent;

     - The use of $2.8 million received from a legal settlement relating to the
       condemnation of certain real property in Seattle, Washington owned by a
       subsidiary of Salem Holding (the "Settlement") to repay borrowings under
       Salem Holding's credit facility, as hereafter described; and

     - The offering of the old notes, including the application of the net
       proceeds to repay borrowings under Salem Holdings's credit facility.

     The Dividend and the loan to Parent transactions have no impact on the
Parent's financial statements since these transactions are eliminated by
consolidation.

Dividend

     On June 15, 2001, Salem Holding effected the Dividend to Parent of Salem
Holding's publishing and Internet businesses. The Dividend was effected as a
dividend of the capital stock and membership interests, respectively, of Salem
Holding's wholly-owned subsidiaries CCM Communications, Inc. ("CCM") and
OnePlace, LLC, ("OnePlace"). As a result, CCM and OnePlace became direct
subsidiaries of Parent. CCM and OnePlace continue to be guarantors of borrowings
under Salem Holding's credit facility, its existing 9 1/2% notes and the old
notes. The Dividend has been accounted for as an exchange of assets among
entities under common control and accordingly, the assets exchanged are recorded
at their historical cost in a manner similar to the pooling of interest method
of accounting.

Clear Channel and AMFM acquisitions and related transactions

     On August 24, 2000, we completed our acquisition of certain assets of eight
radio stations from affiliates of Clear Channel and AMFM, pursuant to the terms
of an Asset Purchase Agreement dated March 5, 2000, by and among Parent and
affiliates of Clear Channel and AMFM. We completed the acquisition by acquiring
certain assets of the radio stations KALC-FM (Denver, Colorado); KXMX-FM and
KEZY-AM (Anaheim, California); WKNR-AM and WRMR-AM (Cleveland, Ohio); WYGY-FM
and WBOB-AM (Cincinnati, Ohio); and KDGE-FM (Dallas, Texas) through four direct
or indirect, wholly-owned subsidiaries of Parent. Salem Holding acquired all of
the radio station assets, with the exception of the assets of KALC-FM which was
acquired by Parent through its wholly-owned subsidiary SCA License Corporation.
Accordingly, the accompanying unaudited pro forma combined condensed
consolidated financial statements of Salem Holding exclude the historical
balance sheet and statement of operations of KALC-FM. In addition, the unaudited
pro forma combined condensed consolidated financial statements exclude KXMX-FM
because the format of that radio station was changed upon acquisition and, thus,
the historical operating results are not meaningful.

                                        33


     The assets acquired from the Clear Channel and AMFM affiliates consist
principally of property, plant and equipment, FCC licenses and other intangible
assets used in the radio broadcasting business and such assets will continue to
be utilized by our subsidiaries for such purposes. The acquired assets,
including KALC-FM, were purchased for $185.6 million in cash, which purchase
price was determined through arms-length negotiation. The acquisition was
financed through cash on hand, borrowings and the sale of certain assets,
including the FCC license, of radio station KLTX-AM (Los Angeles, California).
On August 22, 2000, Salem Holding sold the assets of radio station KLTX-AM for
$29.5 million. The accompanying unaudited pro forma condensed consolidated
financial statements reflect the sale of KLTX-AM.

     In connection with the acquisition from the Clear Channel and AMFM
affiliates, Parent borrowed $58.0 million under a short-term credit facility
provided by ING (U.S.) Capital, LLC as Agent, and Salem Holding borrowed an
additional $110.8 million under the existing credit facility, which existing
credit facility was amended in August 2000 to (i) permit up to $225.0 million in
borrowing, (ii) replace Parent with its wholly-owned subsidiary, Salem Holding,
as borrower, and (iii) amend or waive certain provisions of the existing credit
facility. In November 2000, Salem Holding borrowed $48.3 million under the
credit facility and loaned it to Parent for its use in paying off the short-term
credit facility.

     Pro forma amounts for WYGY-FM have not been included in this prospectus as
that station had not operated on a stand-alone basis prior to being acquired by
Salem Holding and operating results were not material. Accordingly, historical
amounts would not be material or meaningful to the readers of this financial
information.

     In November 2000, Salem Holding exchanged the assets of radio stations
KDGE-FM (Dallas, Texas) for KLTY-FM (Dallas, Texas) pursuant to an asset
exchange agreement with Sunburst Dallas, LP ("Sunburst"). The two companies had
previously entered into a local marketing agreement to begin operating the
stations on October 1, 2000. The LMA allowed Salem Holding to operate KLTY-FM,
and Sunburst to operate KDGE-FM, before the exchange transaction had closed.
Accordingly, the accompanying unaudited pro forma combined condensed
consolidated financial statements exclude the pro forma affect of KDGE-FM and
include the pro forma effect of KLTY-FM.

     For accounting purposes, Salem Holding accounted for the Clear Channel
Transaction acquisitions as a purchase of assets; accordingly, the net assets of
the acquired radio stations have been adjusted to their fair values as part of
the allocation of the purchase price. The August 24, 2000 acquisitions and the
related transactions described above are herein referred to as the Clear Channel
Transaction.

Settlement

     On June 1, 2001, Salem Radio Properties, Inc., a wholly-owned subsidiary of
Salem Holding, entered into an agreement with the Port of Seattle to settle the
Port of Seattle's Petition in Eminent Domain seeking condemnation of the
property rights used in the operation of radio station KKOL-AM (Seattle,
Washington). Pursuant to the settlement agreement, Salem Radio Properties, Inc.
was paid approximately $2.8 million in June 2001 as just compensation for the
property rights taken by the Port of Seattle and must surrender the property
rights on or before December 31, 2001. Salem Holding does not anticipate that
the Settlement will have a significant impact the operations of KKOL-AM.
Subsequent to June 30, 2001 Salem Holding used the $2.8 million from the
settlement to repay borrowings under its credit facility.

     The accompanying unaudited pro forma condensed consolidated balance sheet
gives effect to the use of the $2.8 million proceeds from the Settlement to
reduce Salem Holding's debt, as if it had occurred at June 30, 2001. The
Dividend and the Clear Channel Transactions described above are reflected in
Salem Holding's June 30, 2001 condensed consolidated balance sheet.

     The accompanying unaudited pro forma condensed consolidated statements of
operations for the year ended December 31, 2000 and the six months ended June
30, 2001 give effect to the Dividend, the interest income and expense related to
the loan to Parent, the use of the $2.8 million proceeds from the
                                        34


Settlement to reduce Salem Holding's debt, and the offering of the old notes,
including the application of the net proceeds therefrom, as if these
transactions had occurred as of January 1, 2000. The Dividend adjustment is not
reflected in the unaudited pro forma condensed consolidated statement of
operations of Salem Holding for the six months ended June 30, 2001 since the
actual results for the period exclude the results of Internet and publication
businesses.


     The unaudited pro forma combined condensed consolidated statements of
operations for the year ended December 31, 2000 and for the six months ended
June 30, 2001 also give effect to the Clear Channel Transaction and certain
other individually insignificant in-format acquisitions and certain dispositions
as if they had occurred on January 1, 2000 and was prepared based upon the
historical statement of operations of Salem Holding and the historical
statements of operations of the acquired radio stations. The disposition
adjustments represent the historical operating results through the date of sale
of certain stations and are derived from the historical financial information of
such stations. The disposition adjustments exclude the effect of the sale of
KPRZ-FM (Colorado Springs, Colorado). The effect of this disposition is not
material to the pro forma condensed financial statements.


     The unaudited pro forma condensed consolidated financial statements exclude
all stations acquired and the effects of any borrowing made to fund acquisitions
where the format was changed upon acquisition because such pre-acquisition
operating results are not meaningful.

     The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the historical financial statements of Parent
included in this prospectus (see also Note 12 thereto). The unaudited pro forma
condensed consolidated financial statements are not necessarily indicative of
the actual results of operations or financial position that would have occurred
had these transactions occurred on the dates indicated nor are they necessarily
indicative of future operating results.

                                        35


SALEM HOLDING

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



                                                                   AS OF JUNE 30, 2001
                                                          --------------------------------------
                                                                       SETTLEMENT
                                                           ACTUAL      ADJUSTMENTS     PRO FORMA
                                                          --------     -----------     ---------
                                                                              
BALANCE SHEET:
Current assets:
  Cash and equivalents..................................  $  3,420       $(2,758)(1)   $    662
  Accounts receivable...................................    21,976            --         21,976
  Other receivables.....................................       562            --            562
  Prepaid expenses......................................     1,506            --          1,506
  Due from stockholders.................................       450            --            450
  Deferred income taxes.................................        79            --             79
                                                          --------       -------       --------
Total current assets....................................    27,993        (2,758)        25,235
Property, plant, equipment and software, net............    73,740            --         73,740
Intangible assets, net..................................   248,098            --        248,098
Bond issue costs........................................     7,314            --          7,314
Deferred income taxes...................................        --            --             --
Other assets............................................   106,095            --        106,095
                                                          --------       -------       --------
Total assets............................................  $463,240       $(2,758)      $460,482
                                                          ========       =======       ========
Current liabilities:
  Accounts payable and accrued expenses.................  $  5,202       $    --       $  5,202
  Accrued compensation and other........................     3,716            --          3,716
  Accrued interest......................................     2,999            --          2,999
  Deferred subscription revenue.........................        --            --             --
  Income taxes..........................................       276            --            276
  Capital lease obligations.............................       625            --            625
                                                          --------       -------       --------
Total current liabilities...............................    12,818            --         12,818
Long-term debt..........................................   303,123        (2,758)(1)    300,365
Other liabilities.......................................     1,112            --          1,112
Stockholder's equity....................................   146,187            --        146,187
                                                          --------       -------       --------
Total liabilities and stockholder's equity..............  $463,240       $(2,758)      $460,482
                                                          ========       =======       ========


                                        36


SALEM HOLDING

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                                                         YEAR ENDED DECEMBER 31, 2000
                       ------------------------------------------------------------------------------------------------

                                                                  DISPOSITION   ACQUISITION   ACQUISITION   ACQUISITION
                                     DIVIDEND       PRO FORMA         OF            OF            OF            OF
                        ACTUAL    ADJUSTMENT(2)    FOR DIVIDEND     KLTX-AM       KEZY-AM       WBOB-AM       WRMR-AM
                       --------   --------------   ------------   -----------   -----------   -----------   -----------
                                                            (DOLLARS IN THOUSANDS)
                                                                                       
STATEMENT OF
 OPERATIONS:
Net broadcasting
 revenue.............  $107,786      $    450        $108,236      $ (1,543)       $2,027       $   670       $ 1,769
Other media
 revenue.............     7,916        (7,916)             --            --            --            --            --
                       --------      --------        --------      --------        ------       -------       -------
Total revenue........   115,702        (7,466)        108,236        (1,543)        2,027           670         1,769

Operating expenses:
 Broadcasting
   operating
   expenses..........    60,121            --          60,121          (539)        1,639           910         1,433
 Other media
   operating
   expenses..........    14,863       (14,863)             --            --            --            --            --
 Corporate expenses..    10,457          (712)          9,745            --            60            --            --
 Depreciation and
   amortization......    23,243        (2,490)         20,753           (27)          669           264           699
                       --------      --------        --------      --------        ------       -------       -------
Total operating
 expenses............   108,684       (18,065)         90,619          (566)        2,368         1,174         2,132
                       --------      --------        --------      --------        ------       -------       -------
Operating income
 (loss)..............     7,018        10,599          17,617          (977)         (341)         (504)         (363)

Other income
 (expense):
 Interest income.....       504           (86)            418           490            --            --            --
 Interest income from
   related parties...     1,249            --           1,249            --            --            --            --
 Gain (loss) on sale
   of assets.........       773         3,481           4,254            --            --        (4,073)       (7,789)
 Gain on sale of
   assets to related
   party.............    28,794            --          28,794       (28,794)           --            --            --
 Interest expense....   (15,572)           66         (15,506)           --            --            --            --
 Other income
   (expense), net....      (856)          (38)           (894)           --          (428)           --            --
                       --------      --------        --------      --------        ------       -------       -------
Total other income
 (expense)...........    14,892         3,423          18,315       (28,304)         (428)       (4,073)       (7,789)
                       --------      --------        --------      --------        ------       -------       -------
Income (loss) before
 income taxes........    21,910        14,022          35,932       (29,281)         (769)       (4,577)       (8,152)
Provision (benefit)
 for income taxes....     8,249         5,609          13,858       (11,712)           --            --            --
                       --------      --------        --------      --------        ------       -------       -------
Net income (loss)....  $ 13,661      $  8,413        $ 22,074      $(17,569)       $ (769)      $(4,577)      $(8,152)
                       ========      ========        ========      ========        ======       =======       =======


                                                            YEAR ENDED DECEMBER 31, 2000
                       ------------------------------------------------------------------------------------------------------
                                                                                                SALEM HOLDING
                       ACQUISITION   ACQUISITION      OTHER                                       PRO FORMA          LOAN
                           OF            OF         IN-FORMAT        OTHER        PRO FORMA    FOR ACQUISITIONS    TO PARENT
                         WKNR-AM       KLTY-FM     ACQUISITIONS   DISPOSITIONS   ADJUSTMENTS   AND DISPOSITIONS   ADJUSTMENTS
                       -----------   -----------   ------------   ------------   -----------   ----------------   -----------
                                                               (DOLLARS IN THOUSANDS)
                                                                                             
STATEMENT OF
 OPERATIONS:
Net broadcasting
 revenue.............     $1,431       $ 7,459       $ 1,007         $(832)       $     --         $120,224         $    --
Other media
 revenue.............         --            --            --            --              --               --              --
                          ------       -------       -------         -----        --------         --------         -------
Total revenue........      1,431         7,459         1,007          (832)             --          120,224              --
Operating expenses:
 Broadcasting
   operating
   expenses..........      1,479         4,340         1,042          (500)             --           69,925              --
 Other media
   operating
   expenses..........         --            --            --            --              --               --              --
 Corporate expenses..         --            --            --            --              --            9,805              --
 Depreciation and
   amortization......        251         1,882           218          (185)            984(3)        25,508              --
                          ------       -------       -------         -----        --------         --------         -------
Total operating
 expenses............      1,730         6,222         1,260          (685)            984          105,238              --
                          ------       -------       -------         -----        --------         --------         -------
Operating income
 (loss)..............       (299)        1,237          (253)         (147)           (984)          14,986              --
Other income
 (expense):
 Interest income.....         --            --            --            --              --              908              --
 Interest income from
   related parties...         --            --            --            --              --            1,249           6,485(6)
 Gain (loss) on sale
   of assets.........      3,859            --            --            --              --           (3,749)             --
 Gain on sale of
   assets to related
   party.............         --            --            --            --              --               --              --
 Interest expense....         --        (2,128)           --            --          (5,003)(4)      (22,637)         (3,911)(7)
 Other income
   (expense), net....         --          (603)           --            --              --           (1,925)             --
                          ------       -------       -------         -----        --------         --------         -------
Total other income
 (expense)...........      3,859        (2,731)           --            --          (5,003)         (26,154)          2,574
                          ------       -------       -------         -----        --------         --------         -------
Income (loss) before
 income taxes........      3,560        (1,494)         (253)          147          (5,987)         (11,168)          2,574
Provision (benefit)
 for income taxes....         --            --            --            --          (6,172)(5)       (4,026)          1,030(8)
                          ------       -------       -------         -----        --------         --------         -------
Net income (loss)....     $3,560       $(1,494)      $  (253)        $ 147        $    185         $ (7,142)        $ 1,544
                          ======       =======       =======         =====        ========         ========         =======


                       YEAR ENDED DECEMBER 31, 2000
                       ------------------------

                       SETTLEMENT
                       & OFFERING
                       ADJUSTMENTS    PRO FORMA
                       -----------    ---------
                        (DOLLARS IN THOUSANDS)
                                
STATEMENT OF
 OPERATIONS:
Net broadcasting
 revenue.............    $    --      $120,224
Other media
 revenue.............         --            --
                         -------      --------
Total revenue........         --       120,224
Operating expenses:
 Broadcasting
   operating
   expenses..........         --        69,925
 Other media
   operating
   expenses..........         --            --
 Corporate expenses..         --         9,805
 Depreciation and
   amortization......         --        25,508
                         -------      --------
Total operating
 expenses............         --       105,238
                         -------      --------
Operating income
 (loss)..............         --        14,986
Other income
 (expense):
 Interest income.....         --           908
 Interest income from
   related parties...         --         7,734
 Gain (loss) on sale
   of assets.........         --              (3,749)
 Gain on sale of
   assets to related
   party.............         --            --
 Interest expense....        179(9)           (26,369)
 Other income
   (expense), net....         --              (1,925)
                         -------      --------
Total other income
 (expense)...........        179              (23,401)
                         -------      --------
Income (loss) before
 income taxes........        179              (8,415)
Provision (benefit)
 for income taxes....         72(10)          (2,925)
                         -------      --------
Net income (loss)....    $   107      $       (5,490)
                         =======      ========


                                        37


SALEM HOLDING

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



                                                              SIX MONTHS ENDED JUNE 30, 2001
                                                          --------------------------------------
                                                                      SETTLEMENT
                                                                      & OFFERING
                                                           ACTUAL     ADJUSTMENTS      PRO FORMA
                                                          --------    -----------      ---------
                                                                  (DOLLARS IN THOUSANDS)
                                                                              
STATEMENT OF OPERATIONS:
Net broadcasting revenue................................  $ 62,254      $    --        $ 62,254
Other media revenue.....................................        --           --              --
                                                          --------      -------        --------
Total revenue...........................................    62,254           --          62,254

Operating expenses:
  Broadcasting operating expenses.......................    40,107           --          40,107
  Other media operating expenses........................        --           --              --
  Corporate expenses....................................     7,235           --           7,235
  Depreciation and amortization.........................    13,113           --          13,113
                                                          --------      -------        --------
Total operating expenses................................    60,455           --          60,455
                                                          --------      -------        --------
Operating income (loss).................................     1,799           --           1,799

Other income (expense):
  Interest income.......................................        66           --              66
  Interest income from related parties..................     5,366           --           5,366
  Gain (loss) on sale of assets.........................     2,323           --           2,323
  Gain on sale of assets to related party...............        --           --              --
  Interest expense......................................   (12,747)      (1,005)(9)     (13,752)
  Other income (expense), net...........................      (112)          --            (112)
                                                          --------      -------        --------
Total other income (expense)............................    (5,104)      (1,005)         (6,109)
                                                          --------      -------        --------
Income (loss) before income taxes.......................    (3,305)      (1,005)         (4,310)
Provision (benefit) for income taxes....................    (1,366)        (415)(10)     (1,781)
                                                          --------      -------        --------
Net income (loss).......................................  $ (1,939)     $  (590)       $ (2,529)
                                                          ========      =======        ========


-------------------------
(1) Represents the application of the proceeds from the Settlement to repay debt
    under the credit facility.

(2)Represents the elimination of the operating results of OnePlace and CCM as a
   result of the Dividend. The adjustment to net broadcasting revenue represents
   the sale of advertising to OnePlace that was previously eliminated in
   consolidation. The adjustment to corporate expenses reflects intercompany
   charges to OnePlace and CCM for management costs incurred on behalf of
   OnePlace and CCM based on management's estimate of such costs and anticipated
   future charges for such services as a result of the Dividend. No adjustment
   is made to the six months ended June 30, 2001 since the actual operating
   results presented already exclude OnePlace and CCM.

                                        38


(3) The pro forma adjustment to depreciation and amortization for the in-format
    acquisitions and dispositions is as follows:



                                                                 YEAR ENDED
                                                              DECEMBER 31, 2000
                                                              -----------------
                                                           
Elimination of depreciation and amortization incurred by
  acquired stations prior to acquisition....................       $(3,983)
Increase in depreciation and amortization resulting from
  acquisition of stations (primarily FCC licenses to be
  amortized on a straight-line basis over 15 years).........         4,967
                                                                   -------
Total increase in depreciation and amortization.............       $   984
                                                                   =======


     There are no pro forma adjustments for the six months ended June 30, 2001
     as there were no acquisitions of in-format radio stations.

 (4) The pro forma adjustment to interest expense for the in-format acquisitions
     and dispositions is as follows:



                                                                  INTEREST PERIOD                YEAR ENDED
                                                                -------------------  INTEREST   DECEMBER 31,
                                                      AMOUNT      FROM        TO       RATE         2000
                                                     --------   --------   --------  --------   ------------
                                                                                 
Borrowing for stations acquired in the Clear
  Channel acquisition..............................  $138,600   1/1/2000   8/24/2000   9.53%      $ 8,517
Paydown of long-term debt in connection with the
  sale of KLTX-AM..................................   (29,500)  1/1/2000   8/22/2000   9.53%       (1,797)
Borrowing for the acquisition of KSKY-AM...........     6,000   1/1/2000   7/1/2000    9.53%          284
Borrowing for the acquisition of WGTK-AM                1,750   1/1/2000   10/5/2000   9.53%          127
                                                                                                  -------
Increase in interest expense associated with increase in long-term debt to fund
  acquisitions...............................................................................       7,131
Elimination of interest expense (KLTY-FM debt not assumed)...................................      (2,128)
                                                                                                  -------
Total increase in interest expense...........................................................     $ 5,003
                                                                                                  =======



 (5) Increase in benefit for income taxes resulting from the pro forma net
     historical losses and depreciation and amortization. The tax benefit
     reflected in the pro forma statement of operations is considered more
     likely than not to be realized primarily due to the future reversals of
     existing taxable temporary differences and to a lesser extent anticipated
     future taxable income. The valuation allowance in the historical financial
     statements offsets a portion of the existing deferred tax assets related to
     certain state net operating loss carryforwards, which might not be
     realized. The reasons for the valuation allowance on these state net
     operating loss carryforwards do not impact the assessment that a tax
     benefit should be recognized in the accompanying pro forma financial
     statements.


 (6) The pro forma adjustment to interest income for the loan to parent
     adjustments is as follows:



                                                               YEAR ENDED
                                                              DECEMBER 31,
                                                                  2000
                                                              ------------
                                                           
Loan to Parent..............................................    $ 48,300
Interest rate on promissory note............................       15.8%
                                                                --------
Interest income for the year ended December 31, 2000........       7,631
Interest income already recorded in 2000....................      (1,146)
                                                                --------
Total increase in interest income...........................    $  6,485
                                                                ========


                                        39


 (7) The pro forma adjustment to interest expense for the loan to parent
     adjustments is as follows:



                                                               YEAR ENDED
                                                              DECEMBER 31,
                                                                  2000
                                                              ------------
                                                           
Borrowing under credit facility to fund loan to Parent......    $ 48,300
Weighted average borrowing rate.............................       9.53%
                                                                --------
Interest expense for the year ended December 31, 2000.......       4,603
Interest expense already recorded in 2000...................        (692)
Total increase in interest expense..........................    $  3,911
                                                                ========


 (8) Represents tax effect of incremental interest income and expense described
     in footnotes 6 and 7 above using an effective tax rate of 40% on a combined
     pro forma basis.

 (9) The pro forma adjustment to interest expense for the Settlement and
     offering adjustments is as follows:



                                                                              SIX MONTHS
                                                               YEAR ENDED       ENDED
                                                              DECEMBER 31,     JUNE 30,
                                                                  2000           2001
                                                              ------------    ----------
                                                                        
Increase in interest expense associated with issuance of 9%
  senior subordinated notes.................................    $ 13,500       $ 6,455
Decrease in interest expense associated with paydown on
  credit facility of approximately $145.5 million from
  proceeds of the debt offering based on a weighted average
  interest rate of approximately 9.53% in 2000 and 8.0% in
  2001 (for 175 days prior to closing on June 25, 2001).....     (13,866)       (5,566)
Decrease in interest expense associated with paydown on
  credit facility of approximately $2.8 million from
  proceeds of the Settlement based on a weighted average
  interest rate of approximately 9.53% in 2000 and 8.0% in
  2001......................................................        (263)         (109)
Increase in interest expense associated with amortization of
  bond issue costs related to the 9% senior subordinated
  notes.....................................................         450           225
                                                                --------       -------
Total increase (decrease) in interest expense...............    $   (179)      $ 1,005
                                                                ========       =======


(10) Represents tax effect of incremental interest expense adjustment described
     in footnote 9 using an effective tax rate of 40% on a combined pro forma
     basis.

                                        40


                   UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
                         FINANCIAL STATEMENTS OF PARENT

     The following unaudited pro forma condensed consolidated financial
statements of Parent give effect to the following transactions as further
described below:

     - The August 24, 2000 acquisition of certain assets from Clear Channel
       Communications, Inc. and AMFM Radio, Inc. affiliates and certain related
       transactions, as hereafter described;

     - Certain individually insignificant acquisitions of assets of in-format
       radio stations (i.e. radio stations assets acquired where the station
       format is not changed immediately upon acquisition) and other
       dispositions;

     - The use of $2.8 million proceeds from the Settlement to repay borrowings
       under Salem Holding's credit facility, as hereafter described; and

     - The offering of the old notes, including the application of the net
       proceeds to repay borrowings under Salem Holdings's credit facility.

Clear Channel and AMFM acquisitions and related transactions

     On August 24, 2000, we completed the Clear Channel Transaction. The
unaudited pro forma combined condensed consolidated financial statements exclude
KXMX-FM because the format of that radio station was changed upon acquisition
and thus the historical operating results are not meaningful.

     The assets acquired from the Clear Channel and AMFM affiliates consist
principally of property, plant and equipment, FCC licenses and other intangible
assets used in the radio broadcasting business and such assets will continue to
be utilized by our subsidiaries for such purposes. The acquired assets were
purchased for $185.6 million in cash, which purchase price was determined
through arms-length negotiation. The acquisition was financed through cash on
hand, borrowings and the sale of certain assets, including the FCC license, of
radio station KLTX-AM (Los Angeles, California) for $29.5 million. The
accompanying unaudited pro forma condensed consolidated financial statements
reflect the sale of KLTX-AM.

     Pro forma amounts for WYGY-FM have not been included in this prospectus as
that station had not operated on a stand-alone basis prior to being acquired by
Salem Holding and operating results were not material. Accordingly, historical
amounts would not be material or meaningful to the readers of this financial
information.

     In November 2000, Salem Holding exchanged the assets of radio stations
KDGE-FM (Dallas, Texas) for KLTY-FM (Dallas, Texas) pursuant to an asset
exchange agreement with Sunburst Dallas, LP ("Sunburst"). The two companies had
previously entered into a local marketing agreement to begin operating the
stations on October 1, 2000. The LMA allowed Salem Holding to operate KLTY-FM,
and Sunburst to operate KDGE-FM, before the exchange transaction had closed.
Accordingly, the accompanying unaudited pro forma combined condensed
consolidated financial statements exclude the pro forma effect of KDGE-FM and
include the pro forma effect of KLTY-FM.

     On September 18, 2000, we announced a definitive agreement with Emmis
Communications ("Emmis") to sell KALC-FM (Denver, Colorado) for approximately
$100.0 million in cash. Emmis began operating the station under an LMA on
October 15, 2000. Accordingly, the accompany unaudited pro forma combined
condensed consolidated financial statements exclude the historical statement of
operations of KALC-FM.

     For accounting purposes, the Clear Channel Transaction acquisitions were
accounted for as a purchase of assets; accordingly, the net assets of the
acquired radio stations have been adjusted to their fair values as part of the
allocation of the purchase price.

                                        41


Settlement

     The accompanying unaudited pro forma condensed consolidated balance sheet
gives effect to the use of the $2.8 million proceeds from the Settlement to
reduce Salem Holding's debt, as if it had occurred at June 30, 2001. The other
transactions described above are already reflected in the June 30, 2001
consolidated balance sheet.

     The accompanying unaudited pro forma condensed consolidated statements of
operations for the year ended December 31, 2000 and the six months ended June
30, 2001 give effect to the use of the $2.8 million proceeds from the Settlement
to reduce Salem Holding's debt, and the offering of the old notes, including the
application of the net proceeds therefrom, as if these transactions had occurred
as of January 1, 2000.


     The unaudited pro forma combined condensed consolidated statements of
operations for the year ended December 31, 2000 and for the six months ended
June 30, 2001 also give effect to the Clear Channel Transaction and certain
other individually insignificant in-format acquisitions and certain dispositions
as if they had occurred on January 1, 2000 and was prepared based upon the
historical statement of operations of Parent, and the historical statements of
operations of the acquired radio stations. The disposition adjustments represent
the historical operating results through the date of sale of certain stations
and are derived from the historical financial information of such stations. The
disposition adjustments exclude the effect of the sale of KPRZ-FM (Colorado
Springs, Colorado). The effect of this disposition is not material to the pro
forma condensed financial statements.


     The unaudited pro forma condensed consolidated financial statements exclude
all stations acquired and the effect of any borrowings to fund acquisitions
where the format was changed upon acquisition because such pre-acquisition
operating results are not meaningful.

     The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the historical financial statements of Parent
included in this prospectus. The unaudited pro forma condensed consolidated
financial statements are not necessarily indicative of the actual results of
operations or financial position that would have occurred had these transactions
occurred on the dates indicated nor are they necessarily indicative of future
operating results.

                                        42


PARENT

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



                                                                 AS OF JUNE 30, 2001
                                                      ------------------------------------------
                                                                     SETTLEMENT
                                                       ACTUAL        ADJUSTMENTS       PRO FORMA
                                                      --------       -----------       ---------
                                                                (DOLLARS IN THOUSANDS)
                                                                              
BALANCE SHEET:
Current assets:
  Cash and equivalents..............................  $ 54,079         $(2,758)(1)     $ 51,321
  Accounts receivable...............................    24,779              --           24,779
  Other receivables.................................       984              --              984
  Prepaid expenses..................................     1,839              --            1,839
  Due from stockholders.............................       450              --              450
  Deferred income taxes.............................       658              --              658
                                                      --------         -------         --------
Total current assets................................    82,789          (2,758)          80,031
Property, plant, equipment and software, net........    78,765              --           78,765
Intangible assets, net..............................   300,640              --          300,640
Bond issue costs....................................     7,314              --            7,314
Deferred income taxes...............................        --              --               --
Other assets........................................     7,537              --            7,537
                                                      --------         -------         --------
Total assets........................................  $477,045         $(2,758)        $474,287
                                                      ========         =======         ========
Current liabilities:
  Accounts payable and accrued expenses.............  $  6,466         $    --         $  6,466
  Accrued compensation and other....................     4,075              --            4,075
  Accrued interest..................................     2,999              --            2,999
  Deferred subscription revenue.....................     1,418              --            1,418
  Income taxes......................................       110              --              110
  Capital lease obligations.........................       670              --              670
                                                      --------         -------         --------
Total current liabilities...........................    15,738              --           15,738
Long-term debt......................................   302,967          (2,758)(1)      300,209
Other liabilities...................................    11,401              --           11,401
Stockholder's equity................................   146,939              --          146,939
                                                      --------         -------         --------
     Total liabilities and stockholder's equity.....  $477,045         $(2,758)        $474,287
                                                      ========         =======         ========


                                        43


PARENT

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                                                                          YEAR ENDED DECEMBER 31, 2000
                                                 ------------------------------------------------------------------------------

                                                              DISPOSITION OF   ACQUISITION OF   ACQUISITION OF   ACQUISITION OF
                                                   ACTUAL        KLTX-AM          KEZY-AM          WBOB-AM          WRMR-AM
                                                 ----------   --------------   --------------   --------------   --------------
                                                                             (DOLLARS IN THOUSANDS)
                                                                                                  
STATEMENT OF OPERATIONS:

Net broadcasting revenue.......................  $  110,097      $ (1,543)         $2,027          $   670          $ 1,769
Other media revenue............................       7,916            --              --               --               --
                                                 ----------      --------          ------          -------          -------
Total revenue..................................     118,013        (1,543)          2,027              670            1,769
Operating expenses:
  Broadcasting operating expenses..............      60,714          (539)          1,639              910            1,433
  Other media operating expenses...............      14,863            --              --               --               --
  Corporate expenses...........................      10,457            --              60               --               --
  Depreciation and amortization................      25,479           (27)            669              264              699
                                                 ----------      --------          ------          -------          -------
Total operating expenses.......................     111,513          (566)          2,368            1,174            2,132
                                                 ----------      --------          ------          -------          -------
Operating income (loss)........................       6,500          (977)           (341)            (504)            (363)
Other income (expense):
  Interest income..............................         534            --              --               --               --
  Gain (loss) on sale of assets................         773       (28,794)                          (4,073)          (7,789)
  Gain on sale of assets to related party......      28,794            --              --               --               --
  Interest expense.............................     (17,452)           --              --               --               --
  Other income (expense), net..................        (857)           --            (428)              --               --
                                                 ----------      --------          ------          -------          -------
Total other income (expense)...................      11,792       (28,794)           (428)          (4,073)          (7,789)
                                                 ----------      --------          ------          -------          -------
Income (loss) before income taxes..............      18,292       (29,771)           (769)          (4,577)          (8,152)
Provision (benefit) for income taxes...........       6,996       (11,712)             --               --               --
                                                 ----------      --------          ------          -------          -------
Net income (loss) before extraordinary item....      11,296       (18,059)           (769)          (4,577)          (8,152)
Extraordinary loss.............................      (1,187)           --              --               --               --
                                                 ----------      --------          ------          -------          -------
Net income (loss)..............................  $   10,109      $(18,059)         $ (769)         $(4,577)         $(8,152)
                                                 ==========      ========          ======          =======          =======
Basic and diluted earnings (loss) per share
  before extraordinary item....................  $     0.48
Extraordinary loss per share...................       (0.05)
                                                 ----------
Basic and diluted net earnings (loss) per
  share........................................  $     0.43
                                                 ==========
Basic weighted average shares outstanding......  23,456,088
                                                 ==========
Diluted weighted average shares outstanding....  23,466,849
                                                 ==========


                                                                         YEAR ENDED DECEMBER 31, 2000
                                                 -----------------------------------------------------------------------------

                                                                                      OTHER
                                                 ACQUISITION OF   ACQUISITION OF    IN-FORMAT         OTHER         PRO FORMA
                                                    WKNR-AM          KLTY-FM       ACQUISITIONS    DISPOSITIONS    ADJUSTMENTS
                                                 --------------   --------------   ------------   --------------   -----------
                                                                            (DOLLARS IN THOUSANDS)
                                                                                                    
STATEMENT OF OPERATIONS:
Net broadcasting revenue.......................      $1,431          $ 7,459          $1,007          $(832)         $    --
Other media revenue............................          --               --              --             --               --
                                                     ------          -------          ------          -----          -------
Total revenue..................................       1,431            7,459           1,007           (832)              --
Operating expenses:
  Broadcasting operating expenses..............       1,479            4,144           1,042           (500)              --
  Other media operating expenses...............          --               --              --             --               --
  Corporate expenses...........................          --              799              --             --               --
  Depreciation and amortization................         251            1,882             218           (185)             984(2)
                                                     ------          -------          ------          -----          -------
Total operating expenses.......................       1,730            6,825           1,260           (685)             984
                                                     ------          -------          ------          -----          -------
Operating income (loss)........................        (299)             634            (253)          (147)            (984)
Other income (expense):
  Interest income..............................          --               --              --             --               --
  Gain (loss) on sale of assets................       3,859               --              --             --               --
  Gain on sale of assets to related party......          --               --              --             --               --
  Interest expense.............................          --           (2,128)             --             --           (7,875)(3)
  Other income (expense), net..................          --               --              --             --               --
                                                     ------          -------          ------          -----          -------
Total other income (expense)...................       3,859           (2,128)             --             --           (7,875)
                                                     ------          -------          ------          -----          -------
Income (loss) before income taxes..............       3,560           (1,494)           (253)          (147)          (8,859)
Provision (benefit) for income taxes...........          --               --              --             --           (6,563)(4)
                                                     ------          -------          ------          -----          -------
Net income (loss) before extraordinary item....       3,560           (1,494)           (253)          (147)          (2,296)
Extraordinary loss.............................          --               --              --             --               --
                                                     ------          -------          ------          -----          -------
Net income (loss)..............................      $3,560          $(1,494)         $ (253)         $(147)         $(2,296)
                                                     ======          =======          ======          =====          =======
Basic and diluted earnings (loss) per share
  before extraordinary item....................
Extraordinary loss per share...................
Basic and diluted net earnings (loss) per
  share........................................
Basic weighted average shares outstanding......
Diluted weighted average shares outstanding....


                                                         YEAR ENDED DECEMBER 31, 2000
                                                 --------------------------------------------
                                                      PARENT
                                                    PRO FORMA
                                                 FOR ACQUISITIONS   SETTLEMENT &
                                                       AND            OFFERING
                                                   DISPOSITIONS     ADJUSTMENTS    PRO FORMA
                                                 ----------------   ------------   ----------
                                                            (DOLLARS IN THOUSANDS)
                                                                          
STATEMENT OF OPERATIONS:
Net broadcasting revenue.......................      $122,085         $    --      $  122,085
Other media revenue............................         7,916              --           7,916
                                                     --------         -------      ----------
Total revenue..................................       130,001              --         130,001
Operating expenses:
  Broadcasting operating expenses..............        70,518              --          70,518
  Other media operating expenses...............        14,863              --          14,863
  Corporate expenses...........................        10,517              --          10,517
  Depreciation and amortization................        30,234              --          30,234
                                                     --------         -------      ----------
Total operating expenses.......................       126,132              --         126,132
                                                     --------         -------      ----------
Operating income (loss)........................         3,869              --           3,869
Other income (expense):
  Interest income..............................           534              --             534
  Gain (loss) on sale of assets................       (36,024)             --         (36,024)
  Gain on sale of assets to related party......        28,794              --          28,794
  Interest expense.............................       (27,455)            179(5)      (27,276)
  Other income (expense), net..................        (1,888)             --          (1,888)
                                                     --------         -------      ----------
Total other income (expense)...................       (36,039)            179         (35,860)
                                                     --------         -------      ----------
Income (loss) before income taxes..............       (32,170)            179         (31,991)
Provision (benefit) for income taxes...........       (11,279)             72(6)      (11,207)
                                                     --------         -------      ----------
Net income (loss) before extraordinary item....       (20,891)            107         (20,784)
Extraordinary loss.............................        (1,187)             --          (1,187)
                                                     --------         -------      ----------
Net income (loss)..............................      $(22,078)        $   107      $  (21,971)
                                                     ========         =======      ==========
Basic and diluted earnings (loss) per share
  before extraordinary item....................                                    $    (0.89)
Extraordinary loss per share...................                                         (0.05)
                                                                                   ----------
Basic and diluted net earnings (loss) per
  share........................................                                    $    (0.94)
                                                                                   ==========
Basic weighted average shares outstanding......                                    23,456,088
                                                                                   ==========
Diluted weighted average shares outstanding....                                    23,466,849
                                                                                   ==========


                                        44


PARENT

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



                                                               SIX MONTHS ENDED JUNE 30, 2001
                                                       -----------------------------------------------
                                                                    SETTLEMENT & OFFERING
                                                         ACTUAL          ADJUSTMENTS        PRO FORMA
                                                       ----------   ---------------------   ----------
                                                                   (DOLLARS IN THOUSANDS)
                                                                                   
STATEMENT OF OPERATIONS:
Net broadcasting revenue.............................  $   63,975          $    --          $   63,975
Other media revenue..................................       4,068               --               4,068
                                                       ----------          -------          ----------
Total revenue........................................      68,043               --              68,043
Operating expenses:
  Broadcasting operating expenses....................      41,091               --              41,091
  Other media operating expenses.....................       5,016               --               5,016
  Corporate expenses.................................       7,235               --               7,235
  Depreciation and amortization......................      15,233               --              15,233
                                                       ----------          -------          ----------
Total operating expenses.............................      68,575               --              68,575
                                                       ----------          -------          ----------
Operating income (loss)..............................        (532)              --                (532)
Other income (expense):
  Interest income....................................       1,554               --               1,554
  Interest income from related parties...............          --               --                  --
  Gain (loss) on sale of assets......................       2,518               --               2,518
  Gain on sale of assets to related party............          --               --                  --
  Interest expense...................................     (12,749)          (1,005)(5)         (13,754)
  Other income (expense), net........................        (162)              --                (162)
                                                       ----------          -------          ----------
Total other income (expense).........................      (8,839)          (1,005)             (9,844)
                                                       ----------          -------          ----------
Income (loss) before income taxes....................      (9,371)          (1,005)            (10,376)
Provision (benefit) for income taxes.................      (3,362)            (361)(6)          (3,723)
                                                       ----------          -------          ----------
Net income (loss)....................................  $   (6,009)         $  (644)         $   (6,653)
                                                       ==========          =======          ==========
Basic and diluted net earnings (loss) per share......  $    (0.26)                          $    (0.28)
                                                       ==========                           ==========
Basic and diluted weighted average shares
  outstanding........................................  23,456,088                           23,456,088
                                                       ==========                           ==========


-------------------------
(1) Represents the application of the proceeds from the Settlement to repay debt
    under the credit facility.

(2) The pro forma adjustments to depreciation and amortization for the in-format
    acquisitions and dispositions are as follows:



                                                                YEAR ENDED
                                                               DECEMBER 31,
                                                                   2000
                                                               ------------
                                                            
Elimination of depreciation and amortization incurred by
  acquired stations prior to acquisition....................      $(3,983)
Increase in depreciation and amortization resulting from
  acquisition of stations (primarily FCC licenses to be
  amortized on a straight-line basis over 15 years).........        4,967
                                                                  -------
  Total increase in depreciation and amortization...........      $   984
                                                                  =======


     There were no acquisitions during 2001 of in-format radio stations where
     financial information was readily available and which would have had a
     material effect on the pro forma financial statements.

                                        45


(3) The pro forma adjustment to interest expense for the in-format acquisitions
    and dispositions is as follows:



                                                                    INTEREST PERIOD                 YEAR ENDED
                                                                  --------------------  INTEREST   DECEMBER 31,
                                                        AMOUNT      FROM        TO        RATE         2000
                                                       --------   --------   ---------  --------   ------------
                                                                                    
Borrowing for stations acquired in the Clear Channel
  acquisition........................................  $185,600   1/1/2000   8/24/2000    9.53%      $ 11,389
Paydown of long-term debt in connection with the sale
  of KLTX-AM.........................................   (29,500)  1/1/2000   8/22/2000    9.53%        (1,797)
Borrowing for the acquisition of KSKY-AM.............     6,000   1/1/2000    7/1/2000    9.53%           284
Borrowing for the acquisition of WGTK-AM                  1,750   1/1/2000   10/5/2000    9.53%           127
                                                                                                     --------
Increase in interest expense associated with increase in long-term debt to fund acquisitions....       10,003
Elimination of interest expense (KLTY-FM debt not assumed)......................................       (2,128)
                                                                                                     --------
Total increase in interest expense..............................................................     $  7,875
                                                                                                     ========



(4) Increase in benefit for income taxes resulting from the pro forma net
    historical losses and depreciation and amortization. The tax benefit
    reflected in the pro forma statement of operations is considered more likely
    than not to be realized primarily due to the future reversals of existing
    taxable temporary differences and to a lesser extent anticipated future
    taxable income. The valuation allowance in the historical financial
    statements offsets a portion of the existing deferred tax assets related to
    certain state net operating loss carryforwards, which might not be realized.
    The reasons for the valuation allowance on these state net operating loss
    carryforwards do not impact the assessment that a tax benefit should be
    recognized in the accompanying pro forma financial statements.


(5) The pro forma adjustment to interest expense for the Settlement and offering
    adjustments is as follows:



                                                                              SIX MONTHS
                                                               YEAR ENDED       ENDED
                                                              DECEMBER 31,     JUNE 30,
                                                                  2000           2001
                                                              ------------    ----------
                                                                        
Increase in interest expense associated with issuance of 9%
  senior subordinated notes.................................    $ 13,500       $ 6,455
Decrease in interest expense associated with paydown on
  credit facility of approximately $145.5 million from
  proceeds of debt-offering based on a weighted average
  interest rate of approximately 9.53% in 2000 and 8.0% in
  2001 (for 175 days prior to closing on June 25, 2001).....     (13,866)       (5,566)
Decrease in interest expense associated with paydown on
  credit facility of approximately $2.8 million from
  proceeds of the Settlement based on a weighted average
  interest rate of approximately 9.53% in 2000 and 8.0% in
  2001......................................................        (263)         (109)
Increase in interest expense associated with amortization of
  bond issue costs related to the 9% senior subordinated
  notes.....................................................         450           225
                                                                --------       -------
Total increase (decrease) in interest expense...............    $   (179)      $ 1,005
                                                                ========       =======


(6) Represents tax effect of incremental interest expense described in footnote
    5 using an effective tax rate of 40% on a combined pro forma basis.

                                        46


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

     The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the consolidated
financial statements and related notes of Parent included elsewhere in this
prospectus. The consolidated financial statements are not directly comparable
from period to period because of our acquisition and disposition of radio
stations and our acquisition of other media businesses. See note 2 to Parent's
consolidated financial statements for the year ended December 31, 2000.

     The following discussion and analysis discusses the financial condition and
results of operations of Parent and its subsidiaries (including Salem Holding
and its subsidiaries) on a consolidated basis, unless otherwise indicated.
Except as specified herein, we do not separately discuss the consolidated
financial condition and results of operations of Salem Holding and its
subsidiaries, because Salem Holding has substantially no assets, operations or
cash other than its investment in subsidiaries and its financial condition and
results of operations are substantially similar to those of Parent. Consolidated
balance sheet and income statement data for Parent and its subsidiaries include
financial data of nine radio stations that are owned by SCA License Corporation,
a subsidiary of Parent. These nine stations are not owned by Salem Holding and
its subsidiaries. These nine stations represent approximately 3.3% of total net
broadcasting revenue and approximately 3.8% of total operating expenses. After
June 15, 2001, financial results for our other media businesses, OnePlace and
CCM, will be included in the consolidated financial statements of Parent but
excluded from the consolidated financial results of Salem Holding. See
"Summary -- Organizational Structure" and Note 12 to Parent's consolidated
financial statements.

     Historically, our principal sources of revenue have been:

     - the sale of block program time, both to national and local program
       producers;

     - the sale of advertising time on our radio stations, both to national and
       local advertisers; and

     - the sale of advertising time on our national radio network.

     In 1999, we expanded our sources of revenue and product offerings with the
acquisition of other media businesses, including publishing and Internet
businesses.

     The following table shows gross broadcasting revenue, the percentage of
gross broadcasting revenue for each broadcasting revenue source and net
broadcasting revenue.



                                            YEAR ENDED DECEMBER 31,                    SIX MONTHS
                              ----------------------------------------------------        ENDED
                                   1998              1999               2000          JUNE 30, 2001
                              ---------------   ---------------   ----------------   ---------------
                                             (DOLLARS IN THOUSANDS)
                                                                       
Block program time:
  National..................  $29,506    34.5%  $31,317    32.9%  $ 34,887    29.0%  $18,314    26.2%
  Local.....................   13,389    15.7    15,816    16.6     19,044    15.9    10,717    15.3
                              -------   -----   -------   -----   --------   -----   -------   -----
                               42,895    50.2    47,133    49.5     53,931    44.9    29,031    41.5
Advertising:
  National..................    4,458     5.2     5,855     6.1      7,714     6.4     3,375     4.8
  Local.....................   26,106    30.6    29,686    31.2     40,905    34.1    26,532    37.9
                              -------   -----   -------   -----   --------   -----   -------   -----
                               30,564    35.8    35,541    37.3     48,619    40.5    29,907    42.7
Infomercials................    4,121     4.8     3,764     4.0      5,228     4.4     3,333     4.8
Salem Radio Network(R)......    6,053     7.1     6,983     7.3      9,174     7.6     5,998     8.6
Other.......................    1,778     2.1     1,856     1.9      3,171     2.6     1,650     2.4
                              -------   -----   -------   -----   --------   -----   -------   -----
Gross broadcasting
  revenue...................   85,411   100.0%   95,277   100.0%   120,123   100.0%   69,919   100.0%
                              -------   =====   -------   =====   --------   =====   -------   =====
Less agency commissions.....    7,520             8,155             10,026             5,944
                              -------           -------           --------           -------
Net broadcasting revenue....  $77,891           $87,122           $110,097           $63,975
                              =======           =======           ========           =======


                                        47


     Our broadcasting revenue is affected primarily by the program rates our
radio stations charge and by the advertising rates our radio stations and
network charge. The rates for block program time are based upon our stations'
ability to attract audiences that will support the program producers through
contributions and purchases of their products. Advertising rates are based upon
the demand for advertising time, which in turn is based on our stations' and
network's ability to produce results for its advertisers. Historically we have
not subscribed to traditional audience measuring services. Instead, we have
marketed ourselves to advertisers based upon the responsiveness of our audience.
In selected markets we subscribe to Arbitron, which develops quarterly reports
to measure a radio station's audience share in the demographic groups targeted
by advertisers. See "Business -- Our Radio Stations." Each of our radio stations
and our network have a general pre-determined level of time that they make
available for block programs and/or advertising, which may vary at different
times of the day.

     In recent years, we have begun to place greater emphasis on the development
of local advertising in all of our markets. We encourage our general managers
and sales managers to increase advertising revenue. We can create additional
advertising revenue in a variety of ways, such as removing block programming
that generates marginal audience response, adjusting the start time of programs
to add advertising in more desirable time slots and increasing advertising
rates.

     As is typical in the radio broadcasting industry, our second and fourth
quarter advertising revenue generally exceeds our first and third quarter
advertising revenue. Quarterly revenue from the sale of block program time does
not tend to vary, however, since program rates are generally set annually.

     Our cash flow is affected by a transition period experienced by radio
stations when, due to the nature of the radio station, our plans for the market
and other circumstances, we find it beneficial or advisable to change its
format. This transition period is when we develop a radio station's customer and
listener base. During this period, a station will typically generate negative or
insignificant cash flow.

     In the broadcasting industry, radio stations often utilize trade or barter
agreements to exchange advertising time for goods or services (such as other
media advertising, travel or lodging), in lieu of cash. In order to preserve the
sale of our advertising time for cash, we generally enter into trade agreements
only if the goods or services bartered to us will be used in our business. We
have minimized our use of trade agreements and have generally sold most of our
advertising time for cash. For both the year ended December 31, 2000 and the six
months ended June 30, 2001, we sold 94% of our advertising time for cash. In
addition, it is our general policy not to preempt advertising paid for in cash
with advertising paid for in trade.

     The primary operating expenses incurred in the ownership and operation of
our radio stations include employee salaries and commissions, and facility
expenses (for example, rent and utilities). Beginning in 2000, in connection
with the launch of our contemporary Christian music format in several markets,
we incurred increased amounts for promotional expenses and music license fees.
In addition to these expenses, our network incurs programming costs and lease
expenses for satellite communication facilities. We also incur and will continue
to incur significant depreciation, amortization and interest expense as a result
of completed and future acquisitions of radio stations and existing and future
borrowings.

     OnePlace, our Internet business, earns its revenue from the (i) sales of
streaming services, (ii) sales of banner advertising and sponsorships on the
Internet, and (iii) sales of software and software support contracts. CCM, our
publishing business, earns its revenue by selling advertising in and
subscriptions to its publications. The revenue and related operating expenses of
these businesses are reported as "other media" on our condensed consolidated
statements of operations.

     The performance of a radio broadcasting company is customarily measured by
the ability of its stations to generate broadcast cash flow and EBITDA. We
define broadcast cash flow as net operating income, excluding other media
revenue and other media operating expenses, before depreciation and amortization
and corporate expenses. We define EBITDA as net operating income before
depreciation and amortization. We define after-tax cash flow as income (loss)
before extraordinary item minus gain

                                        48


(loss) on disposal of assets (net of income tax) plus depreciation and
amortization. EBITDA and after-tax cash flow for the year ended December 31,
1999 excludes a $2.6 million charge ($1.9 million, net of income tax) for a
one-time stock grant concurrent with Parent's initial public offering on June
30, 1999.

     Although broadcast cash flow, EBITDA and after-tax cash flow are not
measures of performance calculated in accordance with generally accepted
accounting principles, and should be viewed as a supplement to and not a
substitute for our results of operations presented on the basis of generally
accepted accounting principles, we believe that broadcast cash flow, EBITDA and
after-tax cash flow are useful because they are generally recognized by the
radio broadcasting industry as measures of performance and are used by analysts
who report on the performance of broadcast companies. These measures are not
necessarily comparable to similarly titled measures employed by other companies.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards requiring that all derivatives be recorded in the balance
sheet as either an asset or liability measured at fair value and that changes in
fair value be recognized currently in earnings, unless specific hedge accounting
criteria are met. Certain provisions of SFAS No. 133, including its required
implementation date, were subsequently amended. We adopted SFAS No. 133, as
amended, in the first quarter of 2001 and its adoption did not have a material
effect on our results of operations or our financial position.

     In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
Business Combinations, and No. 142, Goodwill and Other Intangible Assets,
effective for fiscal years beginning after December 15, 2001. Under the new
rules, goodwill and intangible assets deemed to have indefinite lives will no
longer be amortized but will be subject to annual impairment tests in accordance
with the Statements. Other intangible assets will continue to be amortized over
their useful lives.

     The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
nonamortization provisions of SFAS No. 142 is expected to result in a
significant increase in net income. During 2002, the company will perform the
first of the required impairment tests of goodwill and indefinite lived
intangible assets as of January 1, 2002 and has not yet determined what the
effect of these tests will be on the earnings and financial position of the
company.

     In the following discussion of our results of operations, we compare our
results between periods on an as reported basis (that is, the results of
operations of all radio stations and network formats owned or operated at any
time during either period) and on a "same station" basis.

     For the comparison of the results of operations for the year ended December
31, 1999 to the year ended December 31, 1998, we included in our same station
comparisons the results of operations of radio stations and network formats
that:

     - we owned or operated for all of both periods;

     - we acquired or began to operate at any time after the beginning of the
       first relevant comparison period if the station or network format (i) was
       in a market in which we already owned or operated a radio station or
       network format and (ii) was integrated with the existing station or
       network format for our internal financial reporting purposes; or

     - we sold or ceased to operate at any time after the beginning of the first
       relevant comparison period if the station or network format (i) was
       integrated with another station or network format in a market for our
       internal financial reporting purposes prior to the sale or cessation of
       operations and (ii) we continued to own or operate the other station or
       network format following the sale or cessation of operations.

                                        49


     We included in our same station comparisons the results of operations of
our integrated stations and network formats from the date that we acquired or
began to operate them and through the date that we sold or ceased to operate
them, as the case may be.

     For the comparison of the results of operations for the six months ended
June 30, 2001 to the six months ended June 30, 2000 and for the year ended
December 31, 2000 to the year ended December 31, 1999, we include in our same
station comparisons the results of operations of radio stations and networks
that we own or operate in the same format during the current period compared
with the results of the same stations for the corresponding period of the prior
year. We do not include a station or a network in the comparison of the year
ended December 31, 2000 to the year ended December 31, 1999 unless it has been
owned or operated for at least an entire quarter included in each of the current
and corresponding prior year periods.

RESULTS OF OPERATIONS

     The results of operations for the six months ended June 30, 2001 and the
year ended December 31, 2000 include the results of operations of nine radio
stations owned by a subsidiary of Parent that is not a subsidiary of Salem
Holding. The results of operations of those radio stations for such periods were
not significant to the consolidated results of operations of Parent.

Six months ended June 30, 2001 compared to six months ended June 30, 2000

     Net Broadcasting Revenue. Net broadcasting revenue increased $16.6 million
or 35.0% to $64.0 million for the six months ended June 30, 2001 from $47.4
million for the same period of the prior year. The growth is attributable to the
increase in same station revenue and the acquisitions of radio stations and a
network during 2000 and 2001, partially offset by the sales of radio stations
during 2000. On a same station basis, net revenue improved $3.3 million or 11.0%
to $33.4 million for the six months ended June 30, 2001 from $30.1 million for
the same period of the prior year. The improvement was primarily due to an
increase in network revenue due to increased network affiliations and quality
programming, an increase in net revenue at radio stations we acquired in 1998
and 1999 that previously operated with formats other than their current format,
an increase in program rates and increases in advertising time and improved
selling efforts at both the national and local level. Revenue from advertising
as a percentage of our gross broadcasting revenue increased to 42.8% for the six
months ended June 30, 2001 from 36.0% for the period of the prior year. Revenue
from block program time as a percentage of our gross broadcasting revenue
decreased to 41.5% for the six months ended June 30, 2001 from 50.4% for the
same period of the prior year. This change in our revenue mix is primarily due
to our continued efforts to develop more advertising revenue in all of our
markets as well as the launch of our contemporary Christian music format in
several markets.

     Other Media Revenue. Other media revenue increased $0.3 million or 7.9% to
$4.1 million for the six months ended June 30, 2001 from $3.8 million for the
same period in the prior year. The increase is due primarily to our increased
revenue from banner advertising and streaming services, offset by the loss of
revenues from the sale of certain assets which generated revenue from the sale
of advertising in print and online catalogs and product sales.

     Broadcasting Operating Expenses. Broadcasting operating expenses increased
$14.9 million or 56.9% to $41.1 million for the six months ended June 30, 2001
from $26.2 million for the same period of the prior year. The increase is
attributable to operating expenses associated with the acquisitions of radio
stations and a network during 2000 and 2001, promotional expenses associated
with the launch of the contemporary Christian music format in several markets,
and an increase in music license fees, partially offset by the operating
expenses associated with three radio stations sold during 2000. On a same
station basis, broadcasting operating expenses increased $2.1 million or 12.6%
to $18.8 million for the six months ended June 30, 2001 from $16.7 million for
the same period of the prior year. The increase is primarily

                                        50


due to incremental selling and production expenses incurred to produce the
increased revenue in the period.

     Other Media Operating Expenses. Other media operating expenses decreased
$3.1 million or 38.3% to $5.0 million for the six months ended June 30, 2001
from $8.1 million for the same period in the prior year. The decrease is
attributable primarily to the reduction of operating expenses incurred due to
the sale of certain software products, assets and contracts.

     Broadcast Cash Flow. Broadcast cash flow increased $1.8 million or 8.5% to
$23.0 million for the six months ended June 30, 2001 from $21.2 million for the
same period of the prior year. As a percentage of net broadcasting revenue,
broadcast cash flow decreased to 35.8% for the six months ended June 30, 2001
from 44.7% for the same period of the prior year. The decrease is primarily
attributable to the effect of stations acquired during 2000 and 2001 that
previously operated with formats other than their current format and the effect
of the launch of the contemporary Christian music format in several markets.
Acquired and reformatted radio stations typically produce low margins during the
first few years following conversion. Broadcast cash flow margins improve as we
implement scheduled program rate increases and increase advertising revenue on
our stations. On a same station basis, broadcast cash flow improved $1.3 million
or 9.7% to $14.7 million for the six months ended June 30, 2001 from $13.4
million for the same period of the prior year.

     Corporate Expenses. Corporate expenses increased $1.9 million or 35.8% to
$7.2 million in the six months ended June 30, 2001 from $5.3 million in the same
period of the prior year, primarily due to additional overhead costs associated
with the acquisitions of radio stations and a network during 2000 and 2001.

     EBITDA. EBITDA increased $3.1 million or 26.7% to $14.7 million for the six
months ended June 30, 2001 from $11.6 million for the same period of the prior
year. As a percentage of total revenue, EBITDA decreased to 21.6% for the six
months ended June 30, 2001 from 22.7% for the same period of the prior year.
EBITDA was negatively impacted by the results of operations of our other media
businesses, which generated a net loss before depreciation and amortization of
$0.9 million for the six months ended June 30, 2001 as compared to $4.3 million
for the same period of the prior year. Broadcast EBITDA excluding the other
media businesses decreased $0.3 million or 1.9% to $15.6 million for the six
months ended June 30, 2001 from $15.9 million for the same period in the prior
year. As a percentage of net broadcasting revenue, broadcast EBITDA excluding
the other media business decreased to 24.4% for the six months ended June 30,
2001 from 33.5% for the same period of the prior year. The decrease is primarily
attributable to the effect of stations acquired during 2000 and 2001 that
previously operated with formats other than their current format, the effect of
the launch of the contemporary Christian music format in several markets and
increased corporate expenses.

     Depreciation and Amortization. Depreciation and amortization expense
increased $5.0 million or 48.5% to $15.3 million for the six months ended June
30, 2001 from $10.3 million for the same period of the prior year. The increase
is primarily due to depreciation and amortization expense associated with the
acquisitions of radio stations and a network in 2000 and 2001.

     Other Income (Expense). Interest income increased $1.2 million to $1.6
million for the six months ended June 30, 2001 from $0.4 million for the same
period of the prior year, primarily due to interest earned on the investment of
the proceeds from the sale of radio station KALC-FM, Denver, Colorado for $100
million in January 2001. Gain on disposal of assets of $2.5 million for the six
months ended June 30, 2001 is primarily due to a gain recognized on the
condemnation of certain real property in Seattle, Washington. Gain on disposal
of assets of $4.4 million for the six months ended June 30, 2000 is primarily
due to a gain recognized on the sale of the assets of radio station KPRZ-FM,
Colorado Springs, Colorado, partially offset by the loss on sale of certain
assets of our other media businesses. Interest expense increased $7.6 million or
146.2% to $12.8 million for the quarter six months June 30, 2001 from $5.2
million for the same period of the prior year. The increase is due to interest
expense associated with borrowings on the credit facility to fund acquisitions
in 2000. Other expense, net decreased $0.2 million to
                                        51


$0.2 million for the six months ended June 30, 2001 from $0.4 million for the
same period of the prior year, primarily due to decreased bank commitment fees.

     Provision (Benefit) for Income Taxes. Provision (benefit) for income taxes
as a percentage of income (loss) before income taxes (that is, the effective tax
rate) was (36.2)% for the six months ended June 30, 2001 and 113.7% for the same
period of the prior year. For the six months ended June 30, 2001 and 2000 the
effective tax rate differs from the federal statutory income rate of 34.0%
primarily due to the effect of state income taxes and certain expenses that are
not deductible for tax purposes.

     Net Income (Loss). We recognized a net loss of $6.0 million for the six
months ended June 30, 2001 as compared to a net loss of $0.1 million for the
same period of the prior year.

     After-Tax Cash Flow. After-tax cash flow increased $0.1 million or 1.3% to
$7.7 million for the six months ended June 30, 2001 from $7.6 million for the
same period in the prior year. After-tax cash flow was negatively impacted by
the after-tax cash flow of our other media businesses. After-tax cash flow
excluding our other media losses (net of income tax) decreased $1.9 million or
18.9% to $8.3 million for the six months ended June 30, 2001 from $10.2 million
for the same period of the prior year. The decrease is primarily due to an
increase in interest expense and corporate expenses.

Year ended December 31, 2000 compared to year ended December 31, 1999

     Net Broadcasting Revenue. Net broadcasting revenue increased $23.0 million
or 26.4% to $110.1 million in 2000 from $87.1 million in 1999. The growth is
attributable to the increase in same station revenue and the acquisitions of
radio stations and a network during 1999 and 2000, partially offset by the sales
of radio stations during 2000. On a same station basis net revenue improved $8.4
million or 13.2% to $72.3 million in 2000 from $63.9 million in 1999. The
improvement was primarily due to an increase in network revenue due to increased
network affiliations and quality programming, an increase in net revenue at
radio stations we acquired in 1997 and 1998 that previously operated with
formats other than their current format, an increase in program rates and
increases in advertising time and improved selling efforts at both the national
and local level. Revenue from advertising as a percentage of our gross revenue
increased to 40.5% in 2000 from 37.3% in 1999. Revenue from block program time
as a percentage of our gross revenue decreased to 44.9% in 2000 from 49.5% in
1999. This change in our revenue mix is primarily due to our continued efforts
to develop more local advertising sales in all of our markets, as well as the
acquisition and launch of a number of conservative news/talk and contemporary
Christian music formatted stations that do not carry block programming.

     Other Media Revenue. Other media revenue increased $1.5 million or 23.4% to
$7.9 million in 2000 from $6.4 million in 1999. The increase is due primarily to
our increased revenue from banner advertising and streaming services and the
inclusion of revenues from the acquisition of the Involved Christian Radio
Network, which we acquired in November 1999, offset by the loss of revenues from
the sale of certain assets which generated revenue from the sale of advertising
in print and online catalogs.

     Broadcasting Operating Expenses. Broadcasting operating expenses increased
$14.4 million or 31.1% to $60.7 million in 2000 from $46.3 million in 1999. The
increase is attributable to operating expenses associated with the acquisitions
of radio stations and a network in 2000, promotional expenses associated with
the launch of the contemporary Christian music format in several markets, and an
increase in bad debt expense and an increase in music license fees, partially
offset by the operating expenses associated with three radio stations sold
during 2000. On a same station basis, broadcasting operating expenses increased
$4.1 million or 11.2% to $39.5 million in 2000 from $35.4 million in 1999. The
increase is primarily due to incremental selling and production expenses
incurred to produce the increased revenue in the period.

     Other Media Operating Expenses. Other media operating expenses increased
$4.9 million or 49.0% to $14.9 million in 2000 from $10.0 million in 1999. The
increase is due primarily to product fulfillment costs associated with
e-commerce which closed down in 2000, additional streaming and related expenses
to
                                        52


produce the increased revenue in 2000, the inclusion of operating expenses from
the acquisition of the involved Christian Radio Network, which we acquired in
November 1999, offset by the reduction of operating expenses incurred due to the
sale of certain software products, assets and contracts.

     Broadcast Cash Flow. Broadcast cash flow increased $8.6 million or 21.1% to
$49.4 million in 2000 from $40.8 million in 1999. As a percentage of net
broadcasting revenue, broadcast cash flow decreased to 44.9% in 2000 from 46.8%
in 1999. The decrease is primarily attributable to the effect of stations
acquired during 1999 and 2000 that previously operated with formats other than
their current format and the effect of the launch of the contemporary Christian
music format in several markets. Acquired and reformatted radio stations
typically produce low margins during the first few years following conversion.
Broadcast cash flow margins improve as we implement scheduled program rate
increases and increase advertising revenue on our stations. On a same station
basis, broadcast cash flow improved $4.3 million or 15.1% to $32.8 million in
2000 from $28.5 million in 1999.

     Corporate Expenses. Corporate expenses increased $2.0 million or 23.5% to
$10.5 million in 2000 from $8.5 million in 1999, primarily due to additional
overhead costs associated with radio station and other media acquisitions in
1999 and 2000 and increased public reporting and related costs, offset by a
reduction of expenses of $400,000 in 2000 due to the termination of a deferred
compensation agreement.

     EBITDA. EBITDA increased $3.2 million or 11.1% to $32.0 million in 2000
from $28.8 million in 1999. As a percentage of total revenue, EBITDA decreased
to 27.1% in 2000 from 30.8% in 1999. EBITDA was negatively impacted by the
results of operations of our other media businesses acquired during 1999, which
generated a net loss before depreciation and amortization of $7.0 million in
2000 as compared to a net loss of $3.6 million in 1999. EBITDA excluding the
other media businesses increased $6.7 million or 20.7% to $39.0 million in 2000
from $32.3 million in 1999. As a percentage of net broadcasting revenue, EBITDA
excluding the other media businesses decreased to 35.4% in 2000 from 37.1% in
1999. The decrease is primarily attributable to the effect of stations acquired
during 1999 and 2000 that previously operated with formats other than their
current format and the effect of the launch of the contemporary Christian music
format in several markets.

     Depreciation and Amortization. Depreciation expense increased $0.5 million
or 7.6% to $7.1 million in 2000 from $6.6 million in 1999. Amortization expense
increased $6.8 million or 58.6% to $18.4 million in 2000 from $11.6 million in
1999. The increases are due to radio station and other media acquisitions
consummated during 2000 and 1999.

     Other Income (Expense). Interest income decreased $500,000 to $500,000 in
2000 from $1.0 million in 1999. The decrease is primarily due to a decrease in
excess cash available for investment due to acquisitions of radio stations and
other media businesses. Gain on disposal of assets of $29.6 million in 2000 is
primarily due to gains recognized on the sale of radio stations KPRZ-FM,
Colorado Springs, CO and KLTX-AM, Los Angeles, CA, partially offset by the loss
on sale of certain assets of our other media businesses. Interest expense
increased $3.3 million or 23.2% to $17.5 million in 2000 from $14.2 million in
1999. The increase is due to interest expense associated with borrowings on the
credit facility and higher interest expense associated with short-term bridge
financing to fund acquisitions in 2000. Other expense increased $224,000 to
$857,000 in 2000 from $633,000 in 1999 primarily due to increased bank
commitment fees.

     Provision (Benefit) for Income Taxes. Provision (benefit) for income taxes
as a percentage of income (loss) before income taxes and extraordinary item
(that is, the effective tax rate) was 38.3% for 2000 and (26.5%) for 1999. The
effective tax rate in 2000 and 1999 differs from the federal statutory income
tax rate of 35.0% primarily due to the effect of state income taxes and certain
expenses that are not deductible for tax purposes.

     Net Income (Loss). We recognized net income of $10.1 million in 2000,
compared to a net loss of $8.0 million in 1999. Included in the net income for
2000 is a gain on the disposal of assets of

                                        53


$29.6 million and a $1.2 million extraordinary loss, net of income tax benefit,
resulting from the write-off of deferred financing costs related to our
short-term bridge financing.

     After-Tax Cash Flow. After-tax cash flow increased $3.2 million or 20.3% to
$19.0 million in 2000 from $15.8 million in 1999. This increase was offset by
negative after-tax cash flow of our other media businesses. After-tax cash flow
excluding other media losses (net of income tax) increased $5.3 million or 29.6%
to $23.2 million in 2000 from $17.9 million in 1999. The increase is primarily
due to an increase in broadcast cash flow, offset by an increase in interest
expense.

Year Ended December 31, 1999 Compared To Year Ended December 31, 1998

     Net Broadcasting Revenue. Net broadcasting revenue increased $9.2 million
or 11.8% to $87.1 million in 1999 from $77.9 million in 1998. The inclusion of
revenue from the acquisitions of radio stations and revenue generated from local
marketing agreements entered into during 1999 and 1998, partially offset by the
loss of revenue from radio stations sold in 1998, provided $1.9 million of the
increase. On a same station basis, net revenue improved $7.3 million or 9.6% to
$83.1 million in 1999 from $75.8 million in 1998. Included in the same station
comparison are the results of two stations that we began to own or operate in
1999 for a total purchase price of $6.8 million, and three stations that we
acquired in 1998 for a total purchase price of $3.1 million. The improvement was
primarily due to an increase in revenue at the radio stations we acquired in
1997 that previously operated with formats other than their current format, an
increase in program rates and an increase in advertising time and improved
selling efforts at both the national and local level. Revenue from advertising
as a percentage of our gross revenue increased to 37.3% in 1999 from 35.8% in
1998. Revenue from block program time as a percentage of our gross revenue
decreased to 49.5% in 1999 from 50.2% in 1998. This change in our revenue mix is
primarily due to our continued efforts to develop more local advertising sales
in all of our markets.

     Other Media Revenue. Other media revenue was $6.4 million for the year
ended December 31, 1999 and was generated from businesses acquired in 1999.

     Broadcasting Operating Expenses. Broadcasting operating expenses increased
$3.8 million or 8.9% to $46.3 million in 1999 from $42.5 million in 1998. The
inclusion of expenses from the acquisitions of radio stations and expenses
incurred for local marketing agreements entered into during 1999 and 1998,
partially offset by the exclusion of operating expenses from radio stations sold
in 1998, accounted for $1.4 million of the increase. On a same station basis,
broadcasting operating expenses increased $2.4 million or 5.8% to $43.9 million
in 1999 from $41.5 million in 1998, primarily due to incremental selling and
production expenses incurred to produce the increased revenue in the period. The
difference between 1999 and 1998 broadcasting operating expenses was increased
by a one-time credit of $453,000 that we recorded in 1998. The credit related to
music licensing fees and represented the proceeds of a settlement between us and
the two largest performance rights organizations.

     Other Media Operating Expenses. Other media operating expenses were $10.0
million for the year ended December 31, 1999 and were incurred in the businesses
acquired in 1999.

     Broadcast Cash Flow. Broadcast cash flow increased $5.4 million or 15.3% to
$40.8 million in 1999 from $35.4 million in 1998. As a percentage of net
broadcasting revenue, broadcast cash flow increased to 46.8% in 1999 from 45.4%
in 1998. The increase is primarily attributable to the improved performance of
radio stations acquired in 1997 and 1998 that previously operated with formats
other than their current format, offset by a one-time credit for music licensing
fees in 1998. Acquired and reformatted radio stations typically produce low
margins during the first few years following conversion. Broadcast cash flow
margins improve as we implement scheduled program rate increases and increase
advertising revenue on our stations. On a same station basis, broadcast cash
flow improved $4.9 million or 14.3% to $39.2 million in 1999 from $34.3 million
in 1998.

     Corporate Expenses. Corporate expenses increased $1.1 million or 14.9% to
$8.5 million in 1999 from $7.4 million in 1998, primarily due to an increase in
bonuses of $300,000 in 1999 as compared to 1998, an
                                        54


increase in executive officer compensation of $340,000 as compared to 1998,
public reporting costs of $200,000 and additional personnel and overhead costs
associated with radio station and other media acquisitions in 1999.

     EBITDA. EBITDA increased $800,000 or 2.9% to $28.8 million in 1999 from
$28.0 million in 1998. As a percentage of total revenue, EBITDA decreased to
30.8% in 1999 from 35.9% in 1998. EBITDA was negatively impacted by the results
of operations of our other media businesses acquired during 1999, which
generated a net loss before depreciation and amortization of $3.6 million during
the year. EBITDA excluding the other media businesses increased $4.3 million or
15.4% to $32.3 million in 1999 from $28.0 million in 1998. As a percentage of
net broadcasting revenue, EBITDA excluding the other media businesses increased
to 37.1% in 1999 from 35.9% in 1998. The increase is primarily attributable to
the improved performance of radio stations acquired in 1997 and 1998 that
previously operated with formats other than their current format.

     Depreciation and Amortization. Depreciation expense increased $2.3 million
or 53.5% to $6.6 million in 1999 from $4.3 million in 1998. Amortization expense
increased $1.8 million or 18.4% to $11.6 million in 1999 from $9.8 million in
1998. The increases were primarily due to radio station and other media
acquisitions consummated during 1999 and 1998.

     Other Income (Expense). Interest income increased $700,000 to $1.0 million
in 1999 from $300,000 in 1998. The increase is primarily due to the interest
earned on the investment of the net proceeds received on our initial public
offering in July 1999. Interest expense decreased $1.7 million or 10.7% to $14.2
million in 1999 from $15.9 million in 1998. The decrease is primarily due to
interest expense associated with $50 million in principal amount of the existing
9 1/2% notes repurchased in July 1999 partially offset by interest expense
associated with additional borrowings to fund acquisitions consummated during
1998 and the first and second quarters of 1999. Other expense increased $211,000
to $633,000 in 1999 from $422,000 in 1998 primarily due to increased bank
commitment fees.

     Provision (Benefit) For Income Taxes. Provision (benefit) for income taxes
as a percentage of income (loss) before income taxes and extraordinary item
(that is, the effective tax rate) was (26.5)% for 1999 and (17.8%) for 1998. The
effective tax rate in 1999 and 1998 differs from the federal statutory income
tax rate of 34.0% primarily due to the effect of state income taxes and certain
expenses that are not deductible for tax purposes.

     Net Income (Loss). We recognized a net loss of $8.0 million in 1999,
compared to a net loss of $1.6 million in 1998. Included in the net loss for
1999 is a $3.6 million extraordinary loss, net of income tax benefit, resulting
from the premium paid on the repurchase of $50 million principal amount of the
existing 9 1/2% notes, the related write-off of a portion of the unamortized
bond issue costs, and the write-off of deferred financing costs related to the
credit facility. Additionally, we incurred a $1.9 million charge, net of income
tax, related to a one-time stock grant concurrent with our initial public
offering on June 30, 1999.

     After-Tax Cash Flow. After-tax cash flow increased $3.5 million or 28.5% to
$15.8 million in 1999 from $12.3 million in 1998. This increase was offset by
negative after-tax cash flow of our other media businesses in 1999. After-tax
cash flow excluding other media losses (net of income tax) increased $5.6
million or 45.5% to $17.9 million from $12.3 million in 1998. The increase is
primarily due to an increase in broadcast cash flow and a decrease in interest
expense.


RECENT DEVELOPMENTS



     Following the terrorist attacks on the United States on September 11, 2001,
we increased the news and community service programming on our radio stations,
reducing the amount of broadcast time available for commercial advertising. In
addition, certain advertisers cancelled their advertising time. As a consequence
of these events, our financial results were adversely affected and the results
for the quarter ended September 30, 2001 will not meet our management's previous
financial guidance. Our management

                                        55



now estimates net broadcast revenue and broadcast cash flow for the quarter
ended September 30, 2001 to be approximately $33.8 million and $12.0 million,
respectively, reduced from previously announced projections for the quarter of
approximately $35.0 million and $13.3 million, respectively. Our management now
projects after-tax cash flow of $4.7 million for the quarter ended September 30,
2001, reduced from $5.5 million previously estimated for the quarter. In
addition, our management anticipates that same station revenue growth of 6% for
the quarter ended September 30, 2001 compared to the same quarter in 2000, a
smaller increase than the 10% same station revenue growth previously projected
for the comparison periods.



     Further acts of war or terrorism against the United States as well as the
United States' response to the attacks and future security threats may continue
to affect our business operations and those of our advertisers and other
customers. We cannot predict the further negative effects these events may have
on our business operations.


LIQUIDITY AND CAPITAL RESOURCES

     We have historically financed acquisitions of radio stations through
borrowings, including borrowings under Salem Holding's credit facility and, to a
lesser extent, from operating cash flow and selected asset dispositions. We have
historically funded, and will continue to fund, expenditures for operations,
administrative expenses, capital expenditures and debt service required by the
credit facility, the old notes and the exchange notes as well as the existing
9 1/2% notes and from operating cash flow.

     We will fund future acquisitions from cash on hand, borrowings under the
credit facility, sales of existing radio stations and operating cash flow. We
believe that cash on hand, cash flow from operations, borrowings under the
credit facility, and proceeds from the sale of some of our existing radio
stations will be sufficient to permit us to meet our financial obligations, fund
pending acquisitions and fund operations for at least the next twelve months.

     Cash.  Cash and cash equivalents was $54.1 million at June 30, 2001
including $50.6 million held on behalf of SCA License Corporation by a qualified
intermediary under a like-kind exchange agreement to preserve SCA License
Corporation's ability to effect a tax-deferred exchange. In order to realize the
tax benefits of the like-kind exchange, no entity other than SCA License
Corporation can direct disbursement of the funds held by the qualified
intermediary and such funds must be disbursed to acquire replacement property
for SCA License Corporation. See "Business -- Pending Tax Deferred Like-Kind
Asset Exchange Transaction" for more information on this tax deferred
transaction. Working capital was $67.1 million at June 30, 2001. Cash and cash
equivalents was $3.9 million at December 31, 2000. The increase in cash and cash
equivalents is due to cash provided by operating activities and cash provided by
investing activities primarily related to the net proceeds received from the
sale of KALC-FM, Denver, Colorado for approximately $100 million, offset by
$52.1 million of the proceeds used to acquire six radio stations and a network
during the six months ended June 30, 2001.

     Net cash provided by operating activities increased to $3.8 million for the
six months ended June 30, 2001 compared to $7.2 million in the same period of
the prior year, primarily due to an increase in interest expense, offset
partially by increases in broadcast cash flow and interest income. Net cash
provided by operating activities increased to $10.7 million for the year ended
December 31, 2000, compared to $8.2 million in 1999, primarily due to an
increase in broadcast cash flow and an increase in accounts payable and accrued
expenses, partially offset by an increase in accounts receivable and interest
expense.

     Net cash provided by investing activities was $35.3 million for the six
months ended June 30, 2001, compared to net cash used in investing activities of
$46.9 million for the same period of the prior year. The increase is due to cash
received for the sale of KALC-FM, Denver, Colorado, partially offset by cash
used for acquisitions (cash used of $52.8 million to purchase six radio stations
and a network during the six months ended June 30, 2001 as compared to cash used
of $41.6 million to purchase 12 radio stations and a network for the same period
of the prior year) and offset by an increase in capital expenditures. Net

                                        56


cash used in investing activities increased to $219.8 million for the year ended
December 31, 2000, compared to $35.2 million in 1999 primarily due to
acquisitions (cash used of $234.9 million to purchase 26 radio stations and one
network in 2000 compared to cash used of $23.9 million to purchase three radio
stations and other media businesses in 1999).

     Net cash provided by financing activities increased to $11.1 million for
the six months ended June 30, 2001, compared to net cash provided by financing
activities of $10.3 million for the same period of the prior year. The increase
was primarily due to the net proceeds received from the issuance of $150.0
million of the old notes in June 2001 and borrowings under the credit facility
to fund acquisitions, offset by payments of bank credit facility fees and
payments on our credit facility from the proceeds of the notes offering. Net
cash provided by financing activities increased to $178.9 million for the year
ended December 31, 2000, compared to $59.2 million in 1999. The increase was
primarily due to borrowings under the credit facility.

     Credit Facility.  In August 2000, Salem Holding amended its credit facility
and Parent obtained a bridge loan facility principally to finance the
acquisition of eight radio stations on August 24, 2000. To finance the
acquisitions, Salem Holding borrowed $109.1 million under the credit facility
and Parent borrowed $58.0 million under the bridge loan facility with $7.1
million of the bridge loan proceeds used to fund a 12-month interest reserve.

     In November 2000, Parent paid off the bridge facility using available cash,
interest reserves and $48.3 million borrowed under Salem Holding's credit
facility. The bridge loan facility would otherwise have matured on August 23,
2001. Amounts outstanding under the bridge loan facility bore a floating
interest rate of LIBOR plus a spread. The spread ranged from 5% to 6.5%.
Interest was payable quarterly. As a result of the repayment of the bridge loan
facility, Parent wrote-off certain deferred financing costs. The write-off of
$1,187,000, net of a $662,000 income tax benefit, was recorded as an
extraordinary item in the accompanying statement of operations for the year
ended December 31, 2000.

     In November 2000, Salem Holding borrowed $48.3 million under the credit
facility and loaned it to Parent for its use in paying off a portion of the
loans under the bridge loan facility. The loan by Salem Holding to Parent is
represented by a promissory note from Parent which bears interest at 15.8%.
Other assets included on Salem Holding's balance sheet as of December 31, 2000
(see Note 12 to Parent's consolidated financial statements) includes $1.1
million in accrued interest on the promissory note and other miscellaneous
amounts due from Parent and the other unrestricted guarantors.

     Salem Holding is the borrower under the credit facility. At June 30, 2001,
$52.3 million was outstanding under the credit facility. The credit facility was
amended as of June 15, 2001. The description of the credit facility as set forth
below reflects the terms of the amendment. Upon completion of the offering of
the old notes, the borrowing capacity under the credit facility was decreased
from $225.0 million to $150.0 million and the financial ratio tests were
modified to provide Salem Holding with additional borrowing flexibility. The
credit facility matures on June 30, 2007. Aggregate commitments under the credit
facility begin to decrease commencing March 31, 2002. In June 2001, Salem
Holding used the net proceeds of the offering of the old notes to repay
approximately $145.5 million of borrowings under the credit facility. Salem
Holding repaid approximately $2.8 million of borrowings under the credit
facility with the proceeds it received from the Settlement.

     Amounts outstanding under the credit facility bear interest at a base rate,
at Salem Holding's option, of the bank's prime rate or LIBOR, plus a spread. For
purposes of determining the interest rate under the credit facility, the prime
rate spread ranges from 0% to 1.5%, and the LIBOR spread ranges from 0.875% to
2.75%.

     The maximum amount that Salem Holding may borrow under the credit facility
is limited by a ratio of Parent's consolidated existing total adjusted debt to
pro forma twelve-month cash flow (the "Total Adjusted Funded Debt to Cash Flow
Ratio"). The credit facility will allow us to adjust our total debt as used in
such calculation by the lesser of 50% of the aggregate purchase price of
acquisitions of newly

                                        57


acquired non-religious formatted radio stations that we reformat to a religious
talk, conservative talk or religious music format or $30.0 million and the cash
flow from such stations will not be considered in the calculation of the ratio.
The maximum Total Adjusted Funded Debt to Cash Flow Ratio allowed under the
credit facility is 6.5 to 1 through December 30, 2002. Thereafter, the maximum
ratio will decline periodically until December 31, 2006, at which point it will
remain at 4.25 to 1 through June 2007. The Total Adjusted Funded Debt to Cash
Flow Ratio under the credit facility at March 31, 2001, on a pro forma basis,
was 4.74 to 1, resulting in a borrowing availability of approximately $45.1
million. The credit facility also requires Parent to maintain a maximum
consolidated total senior leverage ratio of 3.5 to 1.

     The credit facility contains additional restrictive covenants customary for
credit facilities of the size, type and purpose contemplated which, with
specified exceptions, limits our ability to enter into affiliate transactions,
pay dividends, consolidate, merge or effect certain asset sales, make specified
investments, acquisitions and loans and change the nature of our business. The
credit facility also requires us to satisfy specified financial covenants, which
covenants require Parent and its subsidiaries on a consolidated basis to
maintain specified financial ratios and comply with certain financial tests,
including ratios for maximum leverage as described, minimum interest coverage
(initially upon completion of the offering of the old notes, not less than 1.4
to 1, thereafter increasing periodically until January 1, 2005, at which point
it will remain at 2.5 to 1 until June 2007), minimum debt service coverage (a
static ratio of not less than 1.1 to 1) and minimum fixed charge coverage (a
static ratio of not less than 1.1 to 1). Parent and all of its subsidiaries,
except for Salem Holding, are guarantors of borrowings under the credit
facility. The credit facility is secured by pledges of all of Parent's and its
subsidiaries' assets and all of the capital stock of Parent's subsidiaries.

     Initial Public Offering.  Parent received net proceeds of $140.1 million
from its initial public offering in July 1999, which was used to pay a portion
of the existing 9 1/2% notes and amounts outstanding under the credit facility.

     9 1/2% Senior Subordinated Notes due 2007.  In September 1997, Parent
issued $150.0 million principal amount of 9 1/2% senior subordinated notes due
2007. In July 1999, Parent repurchased $50.0 million in principal amount of
those notes with a portion of the net proceeds of Parent's initial public
offering. As a result of this repurchase, Parent incurred a non-cash charge of
$1.5 million for the write-off of unamortized bond issue costs. This was in
addition to the $3.9 million premium paid in connection with this repurchase.

     In August 2000, Salem Holding assumed the indenture governing the existing
9 1/2% notes in connection with the assignment of substantially all of Parent's
assets and liabilities to Salem Holding, including the obligations as successor
issuer under that indenture. The indenture for the existing 9 1/2% notes
contains restrictive covenants that, among others, limit the incurrence of debt
by Salem Holding and its subsidiaries, the payment of dividends, the use of
proceeds of specified asset sales and transactions with affiliates. Salem
Holding is required to pay $9.5 million per year in interest on the existing
9 1/2% notes. Parent and all of its subsidiaries (other than Salem Holding) are
guarantors of the existing 9 1/2% notes.

     9% Senior Subordinated Notes due 2011.  In June 2001, Salem Holding issued
$150.0 million principal amount of 9% senior subordinated notes due 2011. Salem
Holdings used the net proceeds to repay approximately $145.5 million in
borrowings under the credit facility.

     The indentures for these 9% notes and the existing 9 1/2% notes contain
restrictive covenants limiting indebtedness of Salem Holding and its
subsidiaries. The issuance of these 9% notes places Salem Holding and its
subsidiaries close to the maximum indebtedness allowed under the indentures,
thus limiting future available indebtedness including additional borrowings
under the credit facility.

                                        58


     Summary of Long Term Debt obligations as of June 30, 2001

                                                           
Salem Holding Credit Agreement..............................  $ 52,342
Salem Holding 9 1/2% Senior Subordinated Notes due 2007.....   100,000
Salem Holding 9% Senior Subordinated Notes due 2011.........   150,000
Other long term debt........................................     1,295
Excluding current portion of long term debt.................      (670)
                                                              --------
  Total long term debt (excluding current portion)..........  $302,967
                                                              ========



QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Derivative Instruments

     During the twelve months ended June 30, 2001, we did not invest in market
risk sensitive instruments.

Market Risk

     Borrowings under the credit facility are subject to market risk exposure,
specifically to changes in LIBOR and in the "prime rate" in the United States.
As of June 30, 2001, on a pro forma basis, Salem Holding could borrow up to an
additional $54.7 million under the credit facility. At June 30, 2001, we had
borrowed $52.3 million under the credit facility. Amounts outstanding under the
credit facility bear interest at a base rate, at Salem Holding's option, of the
bank's prime rate or LIBOR, plus a spread. For purposes of determining the
interest rate under the credit facility, the prime rate spread ranges from 0% to
1.5%, and the LIBOR spread ranges from 0.875% to 2.75%. At June 30, 2001, the
blended interest rate on amounts outstanding under our credit facility was
7.01%. At June 30, 2001, a hypothetical 100 basis point increase in the prime
rate would result in additional interest expense of $0.5 million on an
annualized basis.

     In addition to the variable rate debt disclosed above, we have fixed rate
debt with a carrying value of $100.0 million (relating to the 9 1/2% senior
subordinated notes due 2007) and $250.0 million (relating to the 9 1/2% senior
subordinated notes due 2007 as well as the 9% senior subordinated notes due
2011) as of December 31, 2000 and June 30, 2001, respectively, with an aggregate
fair value of $252.0 million as of June 30, 2001. We are exposed to changes in
the fair value of these financial instruments based on changes in the market
rate of interest on this debt. Although the ultimate value of these notes will
be determined by actual market prices, since all of these notes will be
tradeable upon completion of the exchange for the 9% senior subordinated notes
described in this prospectus. Using mathematical formulas we estimate that a
hypothetical 1% increase in market interest rates would result in a decrease in
the aggregate fair value of the notes to approximately $238.0 million and a
hypothetical 1% decrease in the market interest rates would result in the
increase of the fair value of the notes to approximately $267.0 million.

                                        59


                                    BUSINESS

OVERVIEW


     We believe that we are the largest U.S. radio broadcasting company,
measured by number of stations and audience coverage, providing programming
targeted at audiences interested in religious and family issues. Our core
business is the ownership and operation of radio stations in large metropolitan
markets. We own and operate 81 radio stations including 56 stations in 22 of the
top 25 markets. This makes us the eighth largest operator measured by number of
stations overall and the third largest operator measured by number of stations
in the top 25 markets. We own the Salem Radio Network(R), which we believe to be
a leading developer, producer and syndicator of religious and family issues
oriented talk, news and music programming with over 1,600 affiliated radio
stations. We also own a publishing business, CCM, and an Internet business,
OnePlace.


     Our business strategy is to expand and improve our national radio platform
in order to deliver compelling content to audiences interested in religious and
family issues. Traditionally, we have programmed our stations with our primary
Christian teaching and talk format which is talk programming with religious and
family themes. This format generally features nationally syndicated and local
programs produced by organizations that purchase blocks of broadcast time
(usually in 26 or 55 minute increments) on our radio stations. With a renewal
rate of over 90%, our block programming represents stable, predictable revenue
that we believe is resistant to recession. We have expanded our platform in
recent years by acquiring additional radio stations in markets in which we
already have a presence to create radio station clusters. We program these
additional radio stations to feature conservative news/talk and contemporary
Christian music formats, including our recently launched music format The
Fish(TM). Salem Radio Network(R) supports our strategy by enabling us to offer a
variety of program content on our radio stations.

     Both our chief executive officer and our chairman are career radio
broadcasters who have owned and operated radio stations for over 25 years. As we
have grown, we have recruited managers with strong radio backgrounds and a
commitment to our formats. We have a track record of successfully identifying,
acquiring and operating radio stations.

TARGET AUDIENCE AND RADIO FORMAT OVERVIEW

     We are committed to serving our target audience, the segment of the
population interested in religious and family issues. We believe our operations
focus on a highly attractive and growing market. We believe this market has
significant growth potential due to the following reasons:

     - 39% of adults listen to Christian radio programming every week (Barna
       Research Group, Ltd.);

     - in a given week, 37% of adults read the bible and 42% attend a church
       service (Barna Research Group, Ltd.);

     - religious formats are the third largest radio format in the U.S. measured
       by number of commercial and noncommercial stations (The M Street Radio
       Directory);

     - between 1998 and 1999, the number of religious format radio stations
       increased from 1,785 to a record 1,895 (The M Street Radio Directory);
       and

     - sales of religious music represented 4.8% of total album sales in 2000
       (RIAA 2000 Consumer Profile).

     While a variety of music formats, including southern gospel, black gospel,
praise and worship and contemporary Christian, are offered on religious format
stations, the largest single category of religious format is Christian talk and
teaching. Religious talk and music formats can be found on both commercial

                                        60


and non-commercial stations. Commercial radio stations account for approximately
two-thirds of stations with religious formats. The balance of these stations
broadcast from the non-commercial educational band (88.1MHz - 91.9MHz) and are
licensed to non-profit organizations.

     Commercial stations that specialize in religious talk programming generate
the majority of their revenue from the sale of block program time to national
and local program producers. Commercial stations that feature religious music
formats generate nearly all of their revenue from the sale of spot advertising
time to local and national advertisers and national network advertisers.
Non-commercial stations typically obtain revenue through tax-deductible
contributions from listeners, the sale of block program time to national and
local program producers and grants or sponsorships of specific programming that
allow the sponsor's name to be featured. Sale of advertising time is prohibited
on non-commercial stations.

GROWTH AND OPERATING STRATEGIES

     CONTINUE TO FOCUS ON TARGETED AUDIENCE. We attribute our success largely to
a consistent emphasis on reaching the audience interested in religious and
family issues. We have demonstrated a long-term commitment to this audience by
operating radio stations with formats directed to our listeners' specific needs
and interests. This consistent focus and commitment builds loyalty and trust
from our listening audience, block program purchasers and advertisers.

     EMPHASIZE COMPELLING PROGRAM CONTENT. As more listening, reading and
viewing options become available, compelling program content will be a key to
expanding our listening audience and increasing audience response to block
programmers and advertisers. We continually look for new block program
producers. Over the past several years, we have launched two new programming
formats, The Fish(TM), a contemporary Christian music format, and a conservative
news/talk format. Both of these formats enhance our strategy of delivering
compelling program content and enable us to broaden our appeal to our target
audience. Our national radio network will continue to compete aggressively for
talk show talent, expand and refine our music formats, and develop compelling
news and public affairs features.

     BUILD RADIO STATION CLUSTERS. By operating clusters of stations within the
same market, we are able to broadcast a range of formats thereby broadening our
appeal to our target audience and advertisers. By operating clusters we are able
to bundle radio stations for advertising sales purposes when advantageous, and
to achieve cost savings by consolidating our operations.

     PURSUE STRATEGIC RADIO ACQUISITIONS IN LARGE MARKETS. We intend to pursue
acquisitions of radio stations in both new and existing markets, particularly in
large metropolitan areas. Because we believe our presence in large markets makes
us attractive to national block programmers and national advertisers, we will
continue to pursue acquisitions of radio stations in selected top 50 markets
where we currently do not have a presence. In addition, we will explore
opportunities to create clusters by acquiring additional radio stations in our
current markets. Through our acquisition strategy, we reach a greater number and
broader range of listeners. This enables us to increase audience response for
block program customers and expand our advertising revenue base. Since January
1, 2000 we have added a total of 34 radio stations, enhancing our presence in 18
of the top 50 markets.

     BUILD FORMAT AWARENESS. We seek to build local format awareness for each of
our radio stations in order to retain and increase its listening audience,
expand its base of advertisers and provide increased audience response to our
block program customers. We emphasize the development of a radio station's
identity to allow each radio station to better compete by increased promotional
activities, improving production quality and technical facilities, and
developing local on-air personalities.

                                        61


RECENT AND PENDING TRANSACTIONS

  SALEM HOLDING

     Since January 2000, Salem Holding completed the purchase of the following
radio stations:




                                                       MSA                PURCHASE
             DATE                    MARKET(1)       RANK(2)   STATION      PRICE
             ----                    ---------       -------   -------    --------
                                                             
January 2000...................  Atlanta, GA           11      WNIV-AM   $ 8,000,000(3)
                                                               WLTA-AM
January 2000...................  Washington, D.C.       9      WABS-AM     4,100,000
January 2000...................  San Francisco, CA      4      KSFB-FM     8,000,000(4)
February 2000..................  Honolulu, HI          62      KAIM-FM     1,800,000(5)
                                                               KAIM-AM
February 2000..................  Honolulu, HI          62      KHNR-AM     1,700,000(5)
                                                               KGU-AM
April 2000.....................  Atlanta, GA           11      WGKA-AM     8,000,000
June 2000......................  Dallas, TX             6      KSKY-AM    13,000,000(6)
August 2000....................  Dallas, TX             6      KDGE-FM    33,271,000(7)(8)
August 2000....................  Cincinnati, OH        25      WYGY-FM    18,109,000(8)
August 2000....................  Los Angeles, CA        2      KXMX-AM    12,449,000(8)(9)
August 2000....................  Los Angeles, CA        2      KFSH-FM     9,069,000(8)(10)
August 2000....................  Cleveland, OH         23      WHK-AM      7,437,000(8)(11)
August 2000....................  Cleveland, OH         23      WKNR-AM     4,738,000(8)(12)
August 2000....................  Cincinnati, OH        25      WBOB-AM       527,000(8)
October 2000...................  San Diego, CA         15      KCBQ-AM     4,250,000
October 2000...................  Louisville, KY        53      WGTK-AM     1,750,000(13)
October 2001...................  Tampa, FL             20      WTBN-AM     6,750,000



-------------------------
 (1) Actual city of license may differ from metropolitan market served.

 (2) "MSA" means metropolitan statistical area.

 (3) Combined purchase price for WNIV-AM and WLTA-AM.

 (4) KSFB-FM was formerly known as KJQI-FM.

 (5) Combined purchase price.

 (6) Purchase price includes the exchange of KPRZ-FM, Colorado Springs, CO.

 (7) Subsequently exchanged for KLTY-FM, Dallas, TX.

 (8) Acquired in one transaction and an additional station, KALC-FM, Denver, CO
     acquired by an unrestricted guarantor for $185.6 million.

 (9) KXMX-AM was formerly known as KEZY-AM.

(10) KFSH-FM was formerly known as KXMX-FM.

(11) WHK-AM was formerly known as WKNR-AM.

(12) WKNR-AM was formerly known as WRMR-AM.

(13) WGTK-AM was acquired from a company controlled by our Chairman.

     Additionally, on March 31, 2000, Salem Holding purchased all of the shares
of stock of Reach Satellite Network, Inc., for $3.1 million. Reach Satellite
Network owns and operates Solid Gospel, a radio broadcasting network that
produces and distributes music programming to its own radio stations, WBOZ-FM
and WVRY-FM, Nashville, Tennessee, and to independent radio station affiliates.
Reach Satellite Network also owns and operates SolidGospel.com, a website on the
Internet.

                                        62


     On August 22, 2000, Salem Holding sold the assets of radio station KLTX-AM,
Long Beach, CA for $29.5 million to a corporation owned by one of our Board
members. This transaction is described in "Related Party
Transactions -- KLTX-AM."

     On September 1, 2000, Salem Holding exchanged the assets of radio station
KKHT-FM, Houston, Texas for the assets of radio stations WFSH-FM, Atlanta,
Georgia, KLUP-AM, San Antonio, Texas, and WSUN-AM, Tampa, Florida. WFSH-FM was
formerly known as WALR-FM.

     On November 20, 2000, Salem Holding exchanged the assets of radio station
KDGE-FM, Dallas, Texas for the assets of radio station KWRD-FM, Dallas, Texas
and KPXI-FM, Tyler-Longview, Texas. KWRD-FM was formerly known as KLTY-FM.

     In May 2001, Salem Holding acquired the assets of the Dame-Gallagher
Networks, LLC, including the syndicated radio program The Mike Gallagher Show.


     In May 2001, Salem Holding entered into a local marketing agreement whereby
Salem Holding operates KKFS-FM Sacramento, California, and Salem Holding has
exercised its option to acquire the radio station during the fourth quarter of
2001.



     In June 2001, Salem Holding entered into an agreement to acquire the assets
of radio station KSZZ-AM, San Bernardino, California, for $7.0 million.


     In June 2001, Salem Holding entered into an agreement to sell the assets of
radio station KEZY-AM, San Bernardino, California, for $4.0 million to a
corporation owned by one of our directors. The transaction is described in
"Related Party Transactions -- KEZY-AM."

     In July 2001, Salem Holding entered into an agreement to acquire the assets
of radio station KFIS-FM, Portland, Oregon, for $35.8 million.

     In October 2001, Salem Holding entered into an agreement to sell the assets
of radio station WHLO-AM (Akron, Ohio) for $4.5 million.


     On October 22, 2001, Salem Holding acquired for $6.5 million a construction
permit to operate a new FM radio station in Milwaukee, Wisconsin.


  Parent

     In August 2000, Parent, through its subsidiaries that are unrestricted
guarantors, acquired KALC-FM as part of a group acquisition with Clear Channel
Communications, in which Salem Holding also acquired seven radio stations.
Thereafter, all the assets of KALC-FM were transferred to SCA License
Corporation, an unrestricted guarantor. Subsequently, KALC-FM was sold by SCA
License Corporation pursuant to a tax deferred like-kind exchange and the
proceeds of the sale were deposited into a qualified intermediary account for
the acquisition of replacement properties. As of August 1, 2001, SCA License
Corporation has acquired or identified the following radio stations as
replacement properties, which radio stations include all radio stations owned by
Parent's subsidiaries that are unrestricted guarantors.

                                        63




                                                                                    PURCHASE
       DATE ACQUIRED                MARKET(1)           MSA RANK(2)    STATION        PRICE
       -------------                ---------           -----------    -------      --------
                                                                       
February 2001..............  Chicago, IL                      3       WYLL-AM      $29,000,000
February 2001..............  Minneapolis-St. Paul, MN        16       WWTC-AM        4,882,000
February 2001..............  Milwaukee, WI                   30       WYLO-AM(3)     2,018,000
March 2001.................  Louisville, KY                  53       WFIA-AM        1,750,000
March 2001.................  Youngstown-Warren, OH          103       WHKW-AM          500,000
April 2001.................  Boston, MA                       8       WROL-AM       11,000,000
July 2001..................  Cleveland, OH                   23       WFHM-FM       40,500,000
July 2001..................  San Francisco, CA                4       KSFB-AM        9,000,000
July 2001..................  Richmond, VA                    57       WBTK-AM          735,000


-------------------------
(1) Actual city of license may differ from metropolitan market served.

(2) "MSA" means metropolitan statistical area.

(3) Salem Holding has entered into an agreement to acquire a construction permit
    in this market.

     Including acquisitions completed on or before the required July 16, 2001
completion date, 98.7% of the funds in the qualified intermediary account for
the benefit of SCA License Corporation were used for the acquisition of
replacement properties.

     Salem Holding provides services including management, treasury, finance,
procurement, reporting, regulatory, legal, accounting, tax, computer and other
support services to Parent and its subsidiaries (other than Salem Holding)
pursuant to a management agreement dated August 25, 2000. The fees payable to
Salem Holding under the agreement for each fiscal year are determined in advance
by Salem Holding and Parent; but in any event will not exceed 11% of the net
revenue for each entity receiving services (Parent or any of its subsidiaries
other than Salem Holding, as the case may be) for the preceding fiscal year.
Additionally, Salem Communications Acquisition Corporation is required to pay
Salem Holding a one time fee of $400,000 for services under the agreement.

  Pending Tax Deferred Like-Kind Asset Exchange Transaction.

     Section 1031 of the Internal Revenue Code allows property owners to
exchange their property for other "like-kind" property while deferring the
taxable gain on the sale. Section 1031 makes it possible to defer the taxable
gain that is realized from the sale of a property so long as such gain is then
reinvested in another property.

     Although like-kind exchanges are referred to as exchanges, they are
typically not exchanges of property but usually consist of a sale of property
and a separate purchase of property with two different parties. These are
commonly referred to as deferred exchanges. The deferred exchange allows the
property owner to sell one piece of property, the relinquished property, and
then subsequently purchase another piece of property from an unrelated third
party, the replacement property.

     To completely defer all taxable gain, the value of the replacement property
needs to be equal to or greater than the value of the relinquished property, and
all of the proceeds from the sale of the relinquished property need to be
invested in the replacement property. Additionally, the property owner cannot
have actual or constructive receipt of the proceeds of the sale of the
relinquished property while waiting to purchase the replacement property. To
accomplish this, a third party called a "qualified intermediary" is commonly
used to hold the proceeds while waiting to complete the transaction.

     In December 2000, two of Salem Holding's subsidiaries entered into an
agreement with Citicasters Co. and Radio Seaway, Incorporated, for the exchange
of certain radio station assets, including the exchange of our radio stations
WHK-FM (Canton, OH) and WHKK-AM (formerly named WHK-AM, Cleveland, OH). In order
that certain of our subsidiaries can realize tax benefits, the transaction was
structured as a tax deferred like-kind exchange. In conjunction with the
underlying asset exchange, one of

                                        64


Salem Holding's subsidiaries assigned its right under the asset exchange
agreement to acquire the assets of radio station WCLV-FM (Cleveland, OH) to SCA
License Corporation, an unrestricted guarantor. SCA License Corporation used
funds from its own qualified intermediary account, described at "-- Parent's
Acquisitions" above, to pay the fair market value for the assets of WCLV-FM to
Radio Seaway and Salem Holding's subsidiaries' qualified intermediary. Thirty
million five hundred thousand dollars ($30.5 million) now held by Salem
Holding's subsidiaries' qualified intermediary must be used by December 2001 for
the acquisition of replacement properties by those subsidiaries.

     Following these transactions WHK-FM (Canton, OH) will be renamed and the
call letters will be assigned to WCLV-FM (Cleveland, OH).

OUR RADIO STATIONS


     We own and operate a national portfolio of 81 radio stations in 35 markets,
including 25 FM stations and 56 AM stations. The following table sets forth
information about each of our stations, in order of market size:




                           MSA       STATION        YEAR
       MARKET(1)         RANK(2)   CALL LETTERS   ACQUIRED                    FORMAT
       ---------         -------   ------------   --------                    ------
                                                     
New York, NY(3)........      1     WMCA-AM          1989         Christian Teaching and Talk
                                   WWDJ-AM          1994         Christian Teaching and Talk
Los Angeles, CA........      2     KKLA-FM          1985         Christian Teaching and Talk
                                   KRLA-AM          1998         Conservative News/Talk
                                   KXMX-AM          2000         Ethnic Brokered Programming
                                   KFSH-FM          2000         Contemporary Christian Music
Chicago, IL............      3     WZFS-FM          1990         Contemporary Christian Music
                                   WYLL-AM(4)       2001         Christian Teaching and Talk
San Francisco, CA......      4     KFAX-AM          1984         Christian Teaching and Talk
                                   KSFB-FM          2000         Contemporary Christian Music
                                   KSFB-AM          2001         Christian Teaching and Talk
Philadelphia, PA.......      5     WFIL-AM          1993         Christian Teaching and Talk
                                   WZZD-AM          1994         Christian Teaching and Talk
Dallas-Ft. Worth, TX...      6     KLTY-FM          1996         Contemporary Christian Music
                                   KWRD-FM          2000         Christian Teaching and Talk
                                   KSKY-AM          2000         Christian Teaching and Talk
Boston, MA.............      8     WEZE-AM          1997         Christian Teaching and Talk
                                   WROL-AM(4)       2001         Christian Teaching and Talk
Washington, DC.........      9     WAVA-FM          1992         Christian Teaching and Talk
                                   WABS-AM          2000         Christian Teaching and Talk
Houston-Galveston,
  TX...................     10     KKHT-AM          1995         Christian Teaching and Talk
                                   KTEK-AM          1998         Christian Teaching and Talk
Atlanta, GA............     11     WNIV-AM          2000         Christian Teaching and Talk
                                   WLTA-AM          2000         Christian Teaching and Talk
                                   WGKA-AM          2000         Southern Gospel
                                   WFSH-FM          2000         Contemporary Christian Music
Seattle-Tacoma, WA.....     13     KGNW-AM          1986         Christian Teaching and Talk
                                   KLFE-AM          1994         Christian Teaching and Talk
                                   KKMO-AM          1998         Christian Teaching and Talk
                                   KKOL-AM          1999         Conservative News/Talk
Phoenix, AZ............     14     KCTK-AM          1996         Conservative News/Talk
                                   KPXQ-AM          1999         Christian Teaching and Talk
San Diego, CA..........     15     KPRZ-AM          1987         Christian Teaching and Talk
                                   KCBQ-AM          2000         Conservative News/Talk


                                        65




                           MSA       STATION        YEAR
       MARKET(1)         RANK(2)   CALL LETTERS   ACQUIRED                    FORMAT
       ---------         -------   ------------   --------                    ------
                                                     
Minneapolis-St. Paul,
  MN...................     16     KKMS-AM          1996         Christian Teaching and Talk
                                   KYCR-AM          1998         Christian Teaching and Talk
                                   WWTC-AM(4)       2001         Conservative News/Talk
Baltimore, MD..........     19     WITH-AM          1997(5)      Christian Teaching and Talk
Tampa, FL..............     20     WTWD-AM          2000         Christian Teaching and Talk
                                   WTBN-AM          2001(6)(7)   Christian Teaching and Talk
Pittsburgh, PA.........     21     WORD-FM          1993         Christian Teaching and Talk
                                   WPIT-AM          1993         Christian Teaching and Talk
Denver-Boulder, CO.....     22     KRKS-FM          1993         Christian Teaching and Talk
                                   KRKS-AM          1994         Christian Teaching and Talk
                                   KNUS-AM          1996         Conservative News/Talk
                                   KBJD-AM          1999         Contemporary Christian Music
Cleveland, OH (8)......     23     WCCD-AM          1997         Christian Teaching and Talk
                                   WKNR-AM          2000         Sports/Talk(9)
                                   WHK-AM           2000         Christian Teaching and Talk(9)
                                   WFHM-FM(4)       2001         Contemporary Christian Music
Portland, OR...........     24     KPDQ-FM          1986         Christian Teaching and Talk
                                   KPDQ-AM          1986         Christian Teaching and Talk
                                   KFIS-FM          2001(6)(10)  Contemporary Christian
                                                                 Music(9)
Cincinnati, OH.........     25     WTSJ-AM          1997         Christian Teaching and Talk
                                   WBOB-AM          2000         Sports/Talk
                                   WYGY-FM          2000         Country
Sacramento, CA.........     26     KFIA-AM          1995         Christian Teaching and Talk
                                   KTKZ-AM          1997         Conservative News/Talk
                                   KKFS-FM          2001(11)     Contemporary Christian Music(9)
Riverside-San
  Bernardino, CA.......     28     KSZZ-AM          2001(6)      Christian Teaching and Talk
Milwaukee, WI..........     30     WYLO-AM(4)       2001         Christian Teaching and Talk
                                   CP-FM(12)        2001         Contemporary Christian Music
San Antonio, TX........     31     KSLR-AM          1994         Christian Teaching and Talk
                                   KLUP-AM          2000         Adult Nostalgia
Columbus, OH...........     33     WRFD-AM          1987         Christian Teaching and Talk
Nashville, TN..........     43     WBOZ-FM          2000         Southern Gospel
                                   WVRY-FM          2000         Southern Gospel
Louisville, KY.........     53     WLSY-FM          1999         Christian Teaching and Talk
                                   WRVI-FM          1999         Contemporary Christian Music
                                   WGTK-AM          2000         Conservative News/Talk
                                   WFIA-AM(4)       2001         Christian Teaching and Talk
Richmond, VA...........     57     WBTK-AM(4)       2001         Christian Teaching and Talk
Honolulu, HI...........     62     KAIM-AM          2000         Christian Teaching and Talk
                                   KAIM-FM          2000         Contemporary Christian Music
                                   KGU-AM           2000         Conservative News/Talk
                                   KHNR-AM          2000         News/Talk
Colorado Springs, CO...     95     KGFT-FM          1996         Christian Teaching and Talk
                                   KBIQ-FM          1996         Contemporary Christian Music
Youngstown-Warren, OH..    103     WHKW-AM(4)       2001         Christian Teaching and Talk
Oxnard, CA.............    112     KDAR-FM          1974         Christian Teaching and Talk
Tyler-Longview, TX.....    142     KPXI-FM          2000(13)     Christian Teaching and Talk


                                        66


-------------------------
 (1) Actual city of license may differ from metropolitan market served.

 (2) "MSA" means metropolitan statistical area.

 (3) This market includes the Nassau-Suffolk, NY Metro market which
     independently has a MSA rank of 17.

 (4) These stations are owned by SCA License Corporation, an indirect subsidiary
     of Parent and an unrestricted guarantor.

 (5) WITH-AM is simulcast with WAVA-FM, Washington, D.C.

 (6) Pending transaction.

 (7) We operate this station pursuant to a local marketing agreement and will do
     so until we complete this acquisition. We will simulcast this station with
     WTWD-AM, Tampa, FL.

 (8) Subject to consummating pending transactions, we have applied for or intend
     to apply for FCC approval to rename the call letters for the stations in
     this market. To the extent known, the planned call letter reassignments are
     shown in this table.

 (9) We intend to reformat this station to the listed format following
     completion of our pending transaction.

(10)We operate this station pursuant to a local marketing agreement and will do
    so until we complete this acquisition.

(11) We operate this station pursuant to a local marketing agreement and have an
     option to acquire the station, which option expires on June 30, 2002.

(12) We have entered into an agreement to acquire a construction permit to
     operate a new FM station in this market. We intend to format this new
     station with contemporary Christian music.

(13) KPXI-FM is simulcast with KWRD-FM, Dallas, TX.

     PROGRAM REVENUE. For the six months ended June 30, 2001, we derived 26.2%
and 15.3% of our gross broadcasting revenue, or $18.3 million and $10.7 million,
respectively, from the sale of nationally syndicated and local block program
time, respectively. For the year ended December 31, 2000, we derived 29.0% and
15.9% of our gross revenue, or $34.9 million and $19.0 million, respectively,
from the sale of nationally syndicated and local block program time. We derive
nationally syndicated program revenue from a programming customer base
consisting primarily of geographically diverse, well-established non-profit
religious and educational organizations that purchase time on stations in a
large number of markets in the United States. Nationally syndicated program
producers typically purchase 26 or 55 minute blocks on a Monday through Friday
basis and may offer supplemental programming for weekend release. We obtain
local program revenue from community organizations and churches that typically
purchase time primarily for weekend release and from local speakers who purchase
daily releases. We have been successful in assisting quality local programs to
expand into national syndication.

     Purchasers of block program time derive their income from two primary
sources: listener contributions and product sales. Product sales include sales
of inspirational material such as printed literature and periodicals, audio and
video tapes and other miscellaneous items. Revenue from listener contributions
and product sales is used in part to pay for the air time purchased from us. The
nationally syndicated program producers carefully track the source of their
donations and product sales and use this information to measure the return on
their air time investment at each radio station. Because program customers
derive their income primarily from various forms of listener support, and given
the time period usually required for a program to obtain and develop an
audience, our management believes that program customers have generally found it
to be in their best interest to retain a specific time slot on a long-term basis
notwithstanding customers' short-term financial results or economic conditions.

     Our radio stations have enjoyed long-standing relationships with key
customers. Focus on the Family and Insight for Living, recognized as two of the
leading daily radio programs featured on Christian

                                        67


teaching and talk format stations, have been ongoing customers of ours since
1977. We attribute this continuity to our commitment to our religious and family
issues talk format and maintaining our presence in the markets we serve. As is
typical in the radio industry, contracts may generally be canceled by either the
station or the program producer on one month's notice. We typically negotiate
our rate increases on an annual basis.

     ADVERTISING REVENUE. For the six months ended June 30, 2001, we derived
37.9% of our gross revenue, or $26.5 million, from the sale of local spot
advertising and 4.8% of our gross revenue, or $3.4 million, from the sale of
national spot advertising. For the year ended December 31, 2000, we derived
34.1% of our gross revenue, or $40.9 million, from the sale of local spot
advertising and 6.4% of our gross revenue, or $7.7 million, from the sale of
national spot advertising.

     We believe that the listening audiences for our radio stations formatted
with our primary format, which provide the financial support for program
producers purchasing time on these stations, are responsive to affinity
advertisers that promote products targeted to audiences interested in religious
and family issues and are receptive to direct response appeals such as those
offered through infomercials. All of such stations have affinity advertising
customers in their respective markets. Local church groups and many community
organizations such as rescue missions and family crisis support services can
often effectively reach their natural constituencies by advertising on religious
format stations. Advertising is also purchased by local and nationally
affiliated religious bookstores, publishers specializing in inspirational and
religious literature and other businesses that desire to specifically target
audiences interested in religious and family issues. Our stations generate spot
advertising revenue from general market advertisers. Our management believes
that general market retailers are increasingly willing to use niche radio
formats for advertising.

     In general, we do not rely upon traditional audience measuring services
used by general format radio stations. Rather, we sell advertising based upon
the proven success of our existing advertising customers. In selected markets we
subscribe to Arbitron, specifically in certain markets where we broadcast music
and conservative talk formats. A majority of advertisers on our radio stations
are "direct-response" advertisers (that is, advertisers that solicit some type
of response, typically the calling of a toll-free telephone number to purchase a
product or service advertised). These advertisers measure the effectiveness of
their advertising on our stations in terms of:

     - the number of inquiries to the advertiser in which the caller reports
       having heard the advertiser's commercial on one of our radio stations;

     - the volume of new customers for the advertiser given a designated inquiry
       level (for example, the advertiser may require that it experience a
       conversion rate of four new customers for every 10 inquiries); and

     - the revenue attributable to sales that are identified as generated by the
       advertiser's commercial aired on our radio stations.

     The sales staff of our radio stations obtains information regarding
advertisers' level of satisfaction with the results generated by commercials
aired on our radio stations. Our sales staff communicates this information, as
well as information regarding the volume of existing advertisers' repeat
advertising on our radio stations, to prospective advertisers in marketing our
radio stations.

     Our radio stations also receive revenue from national advertisers desiring
to include selected radio stations in national buys covering multiple markets.
These national advertising buys are placed through Salem Radio Representatives,
which receives a commission based on the gross dollar amount of all orders
generated. We regularly run infomercials on our radio stations, generally on
weekends. In reviewing proposed purchases of air time by advertisers and
infomercial producers, we consider the suitability of the content of the
advertising and infomercials for our stations' audiences.

     OPERATIONS. In each of our radio markets, we have a general manager who is
responsible for day-to-day operations, local spot advertising sales and, where
applicable, local program sales for all of our stations
                                        68


in the market. We pay our general managers a base salary plus a percentage of
the respective station's net operating income as well as a bonus for meeting
certain other financial goals. For each station we also have a staff of full and
part-time engineering, programming and sales personnel. We compensate our sales
staff by salary, commissions or a combination of each.

     We have decentralized our operations in response to the rapid growth we
have experienced in recent years. Our operations vice presidents, some of whom
are also station general managers, oversee several markets on a regional basis.
Our operations vice presidents are experienced radio broadcasters with expertise
in sales, programming and production. We will continue to rely on this strategy
of decentralization and encourage operations vice presidents to apply innovative
techniques to the operations they oversee which, if successful, can be
implemented in our other stations.

     Personnel in our corporate headquarters oversee the placement and rate
negotiation for all nationally syndicated programs. Centralized oversight of
this component of our revenue is necessary because our key program customers
purchase time in many of our markets. Corporate headquarters personnel also are
responsible for centralized reporting and financial functions, human resources,
engineering oversight and other support functions designed to provide resources
to local management.

SALEM RADIO NETWORK(R)

     In 1993, we established Salem Radio Network(R) in connection with our
acquisition of certain assets of the former CBN Radio Network. Establishment of
Salem Radio Network(R) was a part of our overall business strategy to develop a
national network of affiliated radio stations anchored by our owned and operated
radio stations in major markets. Salem Radio Network(R), which is headquartered
in Dallas, Texas, develops, produces and syndicates a broad range of programming
specifically targeted to religious and family issues talk and music stations as
well as general market news/talk stations. Currently, we have rights to eleven
full-time satellite channels and all Salem Radio Network(R) product is delivered
to affiliates via satellite.

     Salem Radio Network(R) has more than 1,600 affiliate stations, including
our owned and operated stations, that broadcast one or more of the offered
programming options. These programming options feature talk shows, news and
music. Network operations also include commission revenue of Salem Radio
Representatives from unaffiliated customers and an allocation of operating
expenses estimated to relate to such commissions. Salem Radio Network's gross
revenue, including commission revenue for Salem Radio Representatives, for the
year ended December 31, 2000 was $9.2 million.

     TALK PROGRAMMING. Salem Radio Network(R) offers talk programming designed
to attract listeners to affiliate radio stations by addressing current national
issues from a religious and family issues perspective. Our network currently
produces more than 11 daily and weekly long-form and short-form programs
including The Mike Gallagher Show, The Michael Medved Show, The Hugh Hewitt
Show, Tim Kimmel Live!, Janet Parshall's America and The Cal Thomas Commentary.
As of July 31, 2001, over 700 affiliate radio stations carried some form of
Salem Radio Network(R) talk programming.

     Station affiliations for talk programming are non-exclusive, allowing a
radio station to select specific network programs it wishes to carry. Commercial
affiliates are required to air five minutes of network advertisements during
each hour of network programming carried. Because they are unable to clear
commercial advertisements, non-commercial radio stations that carry our talk
programming pay a monthly access fee.

     NEWS. Salem Radio Network(R) began the production and distribution of news
in 1996 with the purchase of StandardNews. The name was subsequently changed to
SRN News and the news product was repositioned to offer affiliates a
family-focused news service. The service is delivered three times each hour and
provides coverage of national and international news. SRN News operates from its
fully-digital headquarters located in the Washington, D.C. area. SRN News has
fully-equipped broadcast facilities at the White House, United States House of
Representatives and United States Senate that are staffed by
                                        69


full-time correspondents. As of July 31, 2001, Salem Radio Network(R) provided
SRN News to over 1,000 affiliate radio stations, compared with less than 170
affiliates existing at the time the news service was acquired in 1996.

     Commercial radio stations that affiliate with SRN News are required to air
12 minutes of network advertisements between the hours of 6 am and 11 pm daily.
Non-commercial radio stations that affiliate with SRN News pay a monthly access
fee.

     MUSIC. Salem Radio Network(R) provides three syndicated religious music
formats that originate from studios in Nashville. Today's Christian Music
features adult contemporary Christian music targeted at the mainstream 25-to-49
year old audience. Solid Gospel features country gospel and Southern gospel
music. The Word in Praise offers a praise and worship format. All music formats
are available to affiliate radio stations on a 24-hour basis or in selected day
parts. As of July 31, 2001, Salem Radio Network provided some form of music
programming to over 250 affiliate radio stations.

     Each music format requires commercial affiliates to air a minimum number of
minutes per hour for network advertisements. Fixed monthly affiliation fees are
also charged to most of the radio stations that affiliate with each of the
formats. In addition to the three 24-hour music formats, Salem Radio Network(R)
provides weekly music programs, including CCM Radio Magazine and Spin 180.

     SALEM RADIO REPRESENTATIVES. We established Salem Radio Representatives in
1992 as a sales representation company specializing in placing national
advertising on religious format radio stations. Salem Radio Network(R) has an
exclusive relationship with Salem Radio Representatives for the sale of
available Salem Radio Network(R) spot advertising. Salem Radio Representatives
receives a commission on all Salem Radio Network(R) sales. Salem Radio
Representatives also contracts with individual radio stations to sell air time
to national advertisers desiring to include selected company stations in
national buys covering multiple markets. See "-- Radio Stations -- Advertising
Revenue." Salem Radio Representatives administrative offices are located in
Dallas, Texas, and its 15 commissioned sales personnel are located in field
offices in Chicago, Dallas, Seattle, St. Louis, Pittsburgh and Los Angeles.

OTHER MEDIA

     INTERNET. OnePlace is a distributor of Christian radio content on the
Internet, either through the OnePlace website or through our local radio station
websites. Our strategy to integrate our Internet assets centers on OnePlace
serving as both a complement to and extension of our core radio broadcasting
business. The OnePlace business model is similar to our broadcast radio business
model with a combination of revenue from advertising sales and block programmers
paying to have exposure on our websites. The OnePlace website provides a single
location where our customers can listen to any of our radio stations and access
on-demand audio streaming of our program producers, including ministries and
block programmers. This content sharing provides an efficient and cost-effective
means of cross-promoting our content and extending the reach of our radio
advertisers. We also recently introduced SonicPlace.com, which provides
on-demand audio streaming for our Christian music channels. For the six months
ended June 30, 2001, we derived 2.5% of our gross revenue, or $1.7 million, from
the sale of Internet advertising and resources. For the year ended December 31,
2000, we derived 3.0% of our gross revenue, or $3.5 million, from the sale of
Internet advertising and resources.

     PUBLISHING. CCM Communications, Inc., based in Nashville, Tennessee, has
published magazines since 1978 which follow the contemporary Christian music
industry and, more recently, has added publications aimed at church staff. The
products of CCM include CCM Magazine, a monthly consumer magazine that features
interviews with artists, album reviews and concert schedules; Worship Leader, a
resource magazine for planning worship services; and The CCM Update, a weekly
trade magazine directed to Christian music retailers, radio stations and record
company executives, featuring industry news, radio and sales charts and reviews.
For the six months ended June 30, 2001, we derived 3.5% of our gross revenue, or
$2.4 million, from the sale of magazine subscriptions and advertising. For the
year ended

                                        70


December 31, 2000, we derived 3.7% of our gross revenue, or $4.4 million, from
the sale of magazine subscriptions and advertising.

     SATELLITE RADIO. In August 1998 we entered into an exclusive agreement with
XM Satellite Radio, Inc. to develop, produce, supply and market religious and
family issues audio programming for its subscriber-based satellite digital audio
radio service. We have agreed to provide religious and family issues talk
programming on one channel and youth and adult religious music programming on
two additional channels. We have not recognized any revenue with respect to
satellite radio for the six months ended June 30, 2001 or for the year ended
December 31, 2000.

COMPETITION

     RADIO. The radio broadcasting industry, including the religious and family
issues format segment of this industry, is a highly competitive business. The
financial success of each of our radio stations that features the religious and
family issues format is dependent, to a significant degree, upon its ability to
generate revenue from the sale of block program time to national and local
religious and educational organizations. We compete for this program revenue
with a number of different commercial and noncommercial radio station licensees.
While no group owner in the United States specializing in the religious format
approaches us in size of potential listening audience and presence in major
markets, religious format stations exist and enjoy varying degrees of prominence
and success in all markets.


     We also compete for revenue in the spot advertising market with other
commercial religious format and general format radio station licensees. We
compete in the spot advertising market with other media as well, including
broadcast television, cable television, newspapers, magazines, direct mail and
billboard advertising. Our management believes that we are the seventeenth
largest radio broadcaster measured by net broadcasting revenues for the year
ended December 31, 2000.


     General format and other radio broadcasters generally use ratings obtained
from subscription services to set advertising rates. Historically, we have not
subscribed to these services but have marketed ourselves to advertisers based on
the responsiveness of our audience. See "Business -- Our Radio Stations --
Advertising Revenue." In selected markets we subscribe to Arbitron, which
develops quarterly reports to measure a radio station's audience in the
demographic group targeted by advertisers. The following table shows our
comparative position amongst the ten largest U.S. radio broadcasting companies
in terms of number of stations owned.



                                                                NUMBER OF TOP      NUMBER OF STATIONS IN
           TOP TEN RADIO BROADCASTERS              TOTAL         TWENTY-FIVE        THE TOP TWENTY-FIVE
         BY NUMBER OF OWNED STATIONS(1)           STATIONS   MARKETS REPRESENTED          MARKETS
         ------------------------------           --------   -------------------   ---------------------
                                                                          
 1.   Clear Channel Communications Inc. ........   1,226            25/25                   164
 2.   Cumulus Media Inc. .......................     225             0/25                     0
 3.   Citadel Communications Corporation........     205             0/25                     0
 4.   Viacom International Inc. ................     183            22/25                   110
 5.   Entercom Communications Corp. ............      97             3/25                    19
 6.   American Family Association                     84             0/25                     0
      Incorporated..............................
 7.   Salem Communications Corporation..........      83(2)         21/25(3)                 55(4)
 8.   Cox Radio Inc. ...........................      82             5/25                    22
 9.   Waitt Radio Incorporated..................      73             0/25                     0
10.   Radio One, Inc. ..........................      64            14/25                    30


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

(1)  Based on Spring 2001 Radio Market Survey Schedule & Population Rankings
     published by the Arbitron Company, excluding the Commonwealth of Puerto
     Rico.

(2)  Upon completion of announced transactions, our holdings will be 81
     stations.

                                        71


(3)  We disclose elsewhere in this document that we are represented in 22 of 25
     markets because our calculation of stations in the New York, NY market
     includes WWDJ-AM licensed to the Nassau-Suffolk, NY Metro market which
     market independently has the MSA rank of 17.


(4)  Upon completion of announced transactions, our holdings will include 56
     stations in the top twenty-five markets.


     If a competing general market broadcaster converts a radio station to a
format similar to one of ours, or acquires an in-format station, and broadcasts
to a market in which we are present, our station could suffer a reduction in
broadcast cash flow or ratings. Consolidation within the radio broadcast
industry may lead to more general market broadcasters including religious and
family issues format radio stations in their holdings and, thus, increasing
competition from broadcasters with more competitive experience and better
resources which could also lead to a reduction in our broadcast cash flow or
ratings.

     Competition may also come from new media technologies and services that are
being developed or introduced. These include delivery of audio programming by
cable television and satellite systems, digital audio radio services, the
Internet, personal communications services and the authorization by the FCC of a
new service of low powered, limited coverage FM radio stations. Digital audio
broadcasting may deliver multiformat digital radio services by satellite to
national and regional audiences.

     The delivery of live and stored audio programming through the Internet has
also created new competition. In addition, the anticipated commencement of
satellite delivered digital audio radio services, which are intended to deliver
multiple audio programming formats to local and national audiences, may create
additional competition. We have attempted to address these existing and
potential competitive threats through OnePlace and through our exclusive
arrangement to provide religious and family issues talk and music formats on one
of the two FCC licensees of satellite digital audio radio services.


     NETWORK. Salem Radio Network(R) competes with other commercial radio
networks that offer news and talk programming to religious and general format
stations and two non-commercial networks that offer religious music formats. The
network also competes with other news services, broadcast and cable television,
newspapers, magazines and Internet. Salem Radio Network(R) also competes with
other radio networks for the services of talk show personalities. While we do
not believe that Salem Radio Network is a leading radio network for general
broadcast programming, the following table shows the Network's comparative
position amongst the four largest U.S. radio networks offering religious and
family issues oriented programming in terms of number of affiliates.




                     TOP FOUR RELIGIOUS
                   RADIO PROGRAM NETWORKS                     NUMBER OF
                 BY NUMBER OF AFFILIATES(1)                   AFFILIATES
                 --------------------------                   ----------
                                                           
1.  Salem Radio Network.....................................    1,600
2.  USA Radio Network, Inc. ................................    1,450
3.  Broadcast Communications Corp. .........................    1,424
4.  Songtime Inc. ..........................................    1,200


---------------
(1) Based on the CSN International 2001 Directory of Religious Media.

     OTHER MEDIA. Our magazines compete for readers and advertisers with other
publications that follow the religious music industry and publications that
address issues of interest to church leadership. Our Internet business competes
with other companies that deliver on-line audio programming.

EMPLOYEES

     At August 15, 2001, we employed 1,353 full-time and 397 part-time
employees. None of our employees are covered by collective bargaining
agreements, and we consider our relations with our employees to be good.

                                        72


PROPERTIES AND FACILITIES

     The types of properties required to support our radio stations include
offices, studios and tower and antenna sites. A station's studios are generally
housed with its office in a downtown or business district. We generally select
our tower and antenna sites to provide maximum market coverage. Our network
operations are supported by offices and studios from which its programming
originates or is relayed from a remote point of origination. The operations of
our other media businesses are supported by office facilities.

     Our radio stations' studios and offices, the operations of our other media
businesses and our corporate headquarters are located in leased facilities. The
lease for our corporate headquarters in Camarillo, California, expires in the
first quarter of 2002. In June 2001, we entered into an agreement whereby a
subsidiary of Salem Holding will purchase the property for approximately $6.6
million. We anticipate the purchase to be consummated in the second half of 2001
and prior to the expiration of our lease.

     Our network leases satellite transponders used for delivery of its
programming. We either own or lease our radio station tower and antenna sites.
We do not anticipate difficulties in renewing those leases that expire within
the next several years or in obtaining other lease arrangements, if necessary.

     We lease certain property from the principal stockholders or trusts and
partnerships created for the benefit of the principal stockholders and their
families. These leases are described in "Related Party Transactions -- Leases
with Principal Stockholders." All such leases have cost of living adjustments.
Based upon our management's assessment and analysis of local market conditions
for comparable properties, we believe such leases do not have terms that vary
materially from those that would have been available from unaffiliated parties.

     No one property is material to our overall operations. Except as described
above, we believe that our properties are in good condition and suitable for our
operations; however, we continually evaluate opportunities to upgrade our
properties. We own substantially all of our equipment, consisting principally of
transmitting antennae, transmitters, studio equipment and general office
equipment.

LEGAL PROCEEDINGS

     Incident to our business activities, we are a party to a number of legal
proceedings, lawsuits, arbitration and other claims, including the Gospel
Communications International, Inc. ("GCI") matter described in more detail
below. Such matters are subject to many uncertainties and outcomes are not
predictable with assurance. Also, we maintain insurance which may provide
coverage for such matters. Consequently, our management is unable to ascertain
the ultimate aggregate amount of monetary liability or the financial impact with
respect to these matters, however, our management believes, at this time, that
the final resolution of these matters, individually and in the aggregate, will
not have a material adverse effect upon our annual consolidated financial
position, results of operations or cash flows.

     On December 6, 2000, GCI made a demand for arbitration upon us. The demand,
pending before an arbitration panel of the American Arbitration Association,
alleges, among other things, we and our subsidiary OnePlace failed to provide
certain e-commerce software to GCI pursuant to a written contract between GCI
and OnePlace. We have filed an answer to the demand, denying the factual basis
for certain elements of GCI's claims and have asserted counterclaims against GCI
for breach of contract. Based on recent communications with the arbitrators, GCI
has clarified that it seeks $10.0 million in damages for its claims. We will
vigorously defend the action and pursue the counterclaims against GCI although
there can be no assurance that the GCI matter will be resolved in our favor.

FEDERAL REGULATION OF RADIO BROADCASTING

     INTRODUCTION. The ownership, operation and sale of broadcast stations,
including those licensed to us, are subject to the jurisdiction of the FCC,
which acts under authority derived from The Communications Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the
"Communications

                                        73


Act"). The Communications Act was amended by the Telecommunications Act of 1996
(the "Telecommunications Act") to make changes in several broadcast laws. Among
other things, the FCC assigns frequency bands for broadcasting; determines
whether to approve changes in ownership or control of station licenses;
regulates transmission facilities, including power employed, antenna and tower
heights, and location of transmission facilities; 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 under the Communications Act.

     The following is a brief summary of certain provisions of the
Communications Act and of specific FCC regulations and policies. 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) license renewal terms or, for particularly egregious
violations, the denial of a license renewal application, the revocation of a
license or the denial of FCC consent to acquire additional broadcast properties.
For further information concerning the nature and extent of federal regulation
of broadcast stations you should refer to the Communications Act, FCC rules and
the public notices and rulings of the FCC.

     LICENSE GRANT AND RENEWAL. Radio broadcast licenses are granted for maximum
terms of eight years. Licenses may be renewed through an application to the FCC.
Prior to the Telecommunications Act, during certain periods when a renewal
application was pending, competing applicants could file for the radio frequency
being used by the renewal applicant. The Telecommunications Act prohibits the
FCC from considering such competing applications if the FCC 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.

     Petitions to deny license renewals can be filed by interested parties,
including members of the public. Such petitions may raise various issues before
the FCC. The FCC is required to hold hearings on renewal applications if the FCC
is unable to determine that renewal of a license would serve the public
interest, convenience and necessity, or if a petition to deny raises a
"substantial and material question of fact" as to whether the grant of the
renewal application would be prima facie inconsistent with the public interest,
convenience and necessity. Also, during certain periods when a renewal
application is pending, the transferability of the applicant's license is
restricted. We are not currently aware of any facts that would prevent the
timely renewal of our licenses to operate our radio stations, although there can
be no assurance that our licenses will be renewed.

     The FCC classifies each AM and FM station. An AM station operates on either
a clear channel, regional channel or local channel. A clear channel is one on
which AM stations are assigned to serve wide areas. Clear channel AM stations
are classified as either: Class A stations, which operate on an unlimited time
basis and are designated to render primary and secondary service over an
extended area; Class B stations, which operate on an unlimited time basis and
are designed to render service only over a primary service area; and Class D
stations, which operate either during daytime hours only, during limited times
only or on an unlimited time basis with low nighttime power. A regional channel
is one on which Class B and Class D AM stations may operate and serve primarily
a principal center of population and the rural areas contiguous to it. A local
channel is one on which AM stations operate on an unlimited time basis and serve
primarily a community and the suburban and rural areas immediately contiguous
thereto. Class C AM stations operate on a local channel and are designed to
render service only over a primary service area that may be reduced as a
consequence of interference.

     The minimum and maximum facilities requirements for an FM station are
determined by its class. FM class designations depend in part upon the
geographic zone in which the transmitter of the FM station is located. In
general, commercial FM stations are classified as follows, in order of
increasing power and antenna height: Class A, B1, C3, B, C2, C1, C0 and C.

                                        74


     The following table sets forth in order of market size the market, call
letters, FCC license classification, antenna height above average terrain
(HAAT), power and frequency of each of our stations and the date on which each
station's FCC license expires. None of our FCC licenses expires prior to April
1, 2003.



                                                  HAAT       POWER                    EXPIRATION
                            STATION        FCC     IN          IN                      DATE OF
       MARKET(1)          CALL LETTERS    CLASS  METERS   KILOWATTS(2)    FREQUENCY    LICENSE
       ---------          ------------    -----  ------   ------------    ---------   ----------
                                                                    
New York, NY(3).........  WMCA-AM           B      NA     5.0/5.0         570 kHz      6/1/2006
                          WWDJ-AM           B      NA      5.0/5.0        970 kHz      6/1/2006
Los Angeles, CA.........  KKLA-FM           B     878     10.5            99.5 MHz    12/1/2005
                          KRLA-AM           B      NA      20.0/3.0       870 kHz     12/1/2005
                          KXMX-AM           B      NA      20.0/1.3       1190 kHz    12/1/2005
                          KFSH-FM           A     100      6.0            95.9 MHz    12/1/2005
Chicago, IL.............  WZFS-FM           B     129     50.0            106.7 MHz   12/1/2004
                          WYLL-AM           B      NA      50.0/5.0       1160 kHz    12/1/2004
San Francisco, CA.......  KFAX-AM           B      NA     50.0/50.0       1100 kHz    12/1/2005
                          KSFB-FM           A     100      6.0            100.7 MHz   12/1/2005
                          KSFB-AM           D      NA      5.0/0.145      1220 kHz    12/1/2005
Philadelphia, PA........  WFIL-AM           B      NA     5.0/5.0         560 kHz      8/1/2006
                          WZZD-AM           B      NA      50.0/10.0      990 kHz      8/1/2006
Dallas-Ft. Worth, TX....  KLTY-FM           C     460     100.0           94.9 MHz     8/1/2005
                          KWRD-FM           C     561      100.0          100.7 MHz    8/1/2005
                          KSKY-AM           B      NA      10.0/.66       660 kHz      8/1/2005
Boston, MA..............  WEZE-AM           B      NA     5.4/5.4         590 kHz      4/1/2006
                          WROL-AM           D      NA      5.0            950 kHz      4/1/2006
Washington, D.C.........  WAVA-FM           B     165     41.0            105.1 MHz   10/1/2003
                          WABS-AM           D      NA      5.0            780 kHz     10/1/2003
Houston-Galveston, TX...  KKHT-AM           B      NA     10.0/5.0        1070 kHz     8/1/2005
                          KTEK-AM           D      NA     2.7/2.067(4)    1110 kHz     8/1/2005
Atlanta, GA.............  WNIV-AM           D      NA     5.0             970 kHz      4/1/2004
                          WLTA-AM           C      NA      1.0/1.0        1400 kHz     4/1/2004
                          WGKA-AM           B      NA      10.0/2.3(4)    1190 kHz     4/1/2003
                          WFSH-FM          C1     299      100.0          104.7 MHz    4/1/2004
Seattle-Tacoma, WA......  KGNW-AM           B      NA     50.0/5.0        820 kHz      2/1/2006
                          KLFE-AM           B      NA      5.0/5.0        1590 kHz     2/1/2006
                          KKMO-AM           B      NA      5.0/5.0        1360 kHz     2/1/2006
                          KKOL-AM           B      NA      5.0/5.0        1300 kHz     2/1/2006
Phoenix, AZ.............  KCTK-AM           B      NA     5.0/5.0         960 kHz     10/1/2005
                          KPXQ-AM           B      NA      50.0/1.0       1360 kHz    10/1/2005
San Diego, CA...........  KPRZ-AM           B      NA     20.0/10.0       1210 kHz    12/1/2005
                          KCBQ-AM           B      NA      50.0/1.5       1170 kHz    12/1/2005
Minneapolis-St. Paul,
  MN....................  KKMS-AM           B      NA     5.0/5.0         980 kHz      4/1/2005
                          KYCR-AM           B      NA      3.8/0.230      1570 kHz     4/1/2005
                          WWTC-AM           B      NA      5.0/5.0        1280 kHz     4/1/2005
Baltimore, MD...........  WITH-AM           C      NA     1.0/1.0         1230 kHz    10/1/2003
Tampa, FL...............  WTWD-AM           B      NA     5.0/5.0         910 kHz      2/1/2004
                          WTBN-AM           B      NA      5.0/5.0        570 kHz      2/1/2004
Pittsburgh, PA..........  WORD-FM           B     161     43.0            101.5 MHz    8/1/2006
                          WPIT-AM           D      NA      5.0/0.24       730 kHz      8/1/2006


                                        75




                                                  HAAT       POWER                    EXPIRATION
                            STATION        FCC     IN          IN                      DATE OF
       MARKET(1)          CALL LETTERS    CLASS  METERS   KILOWATTS(2)    FREQUENCY    LICENSE
       ---------          ------------    -----  ------   ------------    ---------   ----------
                                                                    
Denver-Boulder, CO......  KRKS-FM(5)        C     300     100.0           94.7 MHz     4/1/2005
                          KRKS-AM           B      NA      4.2/0.39       990 kHz      4/1/2005
                          KNUS-AM           B      NA      5.0/5.0        710 kHz      4/1/2005
                          KBJD-AM           B      NA      10.0/1.0       1650 kHz     4/1/2005
Cleveland, OH...........  WCCD-AM           D      NA     0.5             1000 kHz    10/1/2004
                          WKNR-AM           B      NA      50.0/4.7       850 kHz     10/1/2004
                          WHK-AM            B      NA      50.0/50.0      1220 kHz    10/1/2004
                          WFHM-FM           B     189      31.0           95.5 MHz    10/1/2004
Portland, OR............  KPDQ-FM(5)        C     387     100.0           93.7 MHz     2/1/2006
                          KPDQ-AM           B      NA      1.0/0.5        800 kHz      2/1/2006
                          KFIS-FM          C3     386      6.9            104.1 MHz    2/1/2006
Cincinnati, OH..........  WTSJ-AM           B      NA     1.0/0.279       1050 kHz    10/1/2004
                          WBOB-AM           B      NA      5.0/0.99       1160 kHz     8/1/2003
                          WYGY-FM           B     247      19.5           96.5 MHz    10/1/2004
Sacramento, CA..........  KFIA-AM           B      NA     25.0/1.0        710 kHz     12/1/2005
                          KTKZ-AM           B      NA      5.0/5.0        1380 kHz    12/1/2005
                          KKFS-FM          B1     308      2.55           105.5 MHz   12/1/2005
Riverside-San
  Bernardino, CA........  KSZZ-AM           B      NA     1.0             590 kHz     12/1/2005
Milwaukee-Racine, WI....  WYLO-AM           B      NA     0.4/0.4         540 kHz     12/1/2004
                          CP-FM(6)          A     193      1.65           105.3MHz      6/28/04
San Antonio, TX.........  KSLR-AM           B      NA     5.0/4.3         630 kHz      8/1/2005
                          KLUP-AM           B      NA      5.0/1.0        930 kHz      8/1/2005
Columbus, OH............  WRFD-AM           D      NA     23.0/6.1(4)     880 kHz     10/1/2004
Nashville, TN...........  WBOZ-FM           A     100     6.0             104.9 MHz    8/1/2003
                          WVRY-FM          C2     150      50.0           105.1 MHz    8/1/2003
Louisville, KY..........  WLSY-FM           A     120     3.3             94.7 Mhz     8/1/2003
                          WRVI-FM           A     126      1.9            105.9 Mhz    8/1/2004
                          WGTK-AM           B      NA      5.0/5.0        970 kHz      8/1/2004
                          WFIA-AM           D      NA      1.0/0.163      900 kHz      8/1/2004
Richmond, VA............  WBTK-AM           B      NA     5.0/5.0         1380 kHz    10/1/2003
Honolulu, HI............  KAIM-AM           B      NA     50.0/50.0       870 kHz      2/1/2006
                          KAIM-FM           C     606      99.0           95.5 MHz     2/1/2006
                          KGU-AM            B      NA      10.0/10.0      760 kHz      2/1/2006
                          KHNR-AM           B      NA      10.0/10.0      650 kHz      2/1/2006
Colorado Springs, CO....  KGFT-FM           C     676     72.0            100.7 MHz    4/1/2005
                          KBIQ-FM           C     695      57.0           102.7 MHz    4/1/2005
Youngstown-Warren, OH...  WHKW-AM           B      NA     5.0/5.0         1440 kHz    10/1/2004
Oxnard-Ventura, CA......  KDAR-FM          B1     393     1.5             98.3 MHz    12/1/2005
Tyler-Longview, TX......  KPXI-FM          C3     174     8.1             100.7 MHz    8/1/2005


-------------------------
(1) Actual city of license may differ from the metropolitan market served.

(2) Pursuant to FCC rules and regulations, many AM radio stations are licensed
    to operate at a reduced power during nighttime broadcasting hours, which
    results in reducing the radio station's coverage during those hours of
    operation. Both power ratings are shown, where applicable.

(3) This market includes the Nassau-Suffolk, NY Metro market which independently
    has a MSA rank of 17.

(4) Pursuant to FCC rules and regulations, many AM radio stations are licensed
    to operate at a reduced power during critical hours, the two-hour periods
    immediately following sunrise and preceding sunset.

                                        76


Both daytime power ratings are shown. KTEK-AM and WRFD-AM do not operate during
nighttime hours.

(5) The FCC has adopted rules adding a new class of FM station known as C0.
    Under certain circumstances, some present Class C stations could become
    Class C0 stations, unless Salem, once such circumstances arise, applies for
    a construction permit to increase the antenna height to a level at which a
    station could retain Class C status. If a station is reclassified as a Class
    C0 station, it will be precluded from increasing its antenna height and
    power combination above the limits set for C0 classification.


(6) We have acquired a construction permit to operate a new FM station in this
    market. Pursuant to FCC rules, unless the station is constructed, the
    construction permit will expire three years from the date of grant of the
    construction permit.


     OWNERSHIP MATTERS. The Communications Act prohibits the assignment of a
broadcast license or the transfer of control of a broadcast license without the
prior approval of the FCC. In determining whether to assign, transfer, grant or
renew a broadcast license, 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
limitation on alien ownership, as well as compliance with other FCC policies,
including equal employment opportunity requirements.

     Once a station purchase agreement has been signed, an application for FCC
consent to assignment of license or transfer of control (depending upon whether
the underlying transaction is an asset purchase or stock acquisition) is filed
with the FCC. Approximately 10 to 15 days after this filing, the FCC publishes a
notice advising that the application has been "accepted for filing." This begins
a 30-day statutory public notice period during which third parties have the
opportunity to file formal petitions to deny the proposed transaction. Informal
objections to the transaction may be filed at any time prior to the grant of an
application. During this 30-day period, the FCC staff generally begins its
review of the application and may request additional information from the
applicants in response to any questions the staff may have.

     Assuming that no petitions are filed during the public notice period and
that the proposed transaction poses no issues requiring higher level consent,
the FCC staff often grants the application by delegated authority approximately
10 days after the end of the public notice period. If there is a backlog of
applications or the transaction proposes an issue requiring higher level
consent, the 10-day period can extend to 30 days or more. The parties to the
application are legally authorized to close on the transaction at any time after
the application is granted. At this point, however, the grant is not a "final
order."

     Public notice of the FCC staff grant of an application is usually issued
within seven days of the date on which the application is granted. For a period
of 30 days following the date of this public notice interested parties may file
petitions seeking staff reconsideration or full FCC review of the staff action.
In addition, for a period of 40 days following the date of the public notice,
the FCC, on its own, can review and reconsider the grant. If the FCC itself
adopts an order granting an application or adopts an order affirming the staff
grant of an application, judicial review of the FCC action may be sought in the
United States Court of Appeals for the District of Columbia within 30 days of
the public notice of the FCC's action. In the event the court affirms the FCC's
action, further judicial review may be sought by seeking rehearing en banc from
the Court of Appeals or by certiorari from the United States Supreme Court.

     Assuming that no petitions are filed by third parties and no action staying
or reversing the grant is made by the FCC, then the grant will become a final
order by operation of law at the close of business on the 40th day following the
public notice of the grant. Upon a grant becoming a final order, counsel is able
to deliver an opinion that the grant is no longer subject to administrative or
judicial review, although such actions can nevertheless be set aside in rare
circumstances (for example, fraud on the agency by a party to the application).

                                        77


     The FCC will not issue an unconditional assignment or transfer grant if an
application for renewal of license for the station is pending. Thus, the
foregoing timetables will be altered in the event an application for assignment
or transfer is filed while a license renewal application is pending.

     Under the Communications Act, a broadcast license may not be granted to or
held by a corporation that has more than one-fifth of its capital stock owned or
voted by aliens or their representatives, by foreign governments or their
representatives, or by non-U.S. corporations. Under the Communications Act, a
broadcast license also may not be granted to or held by any corporation that is
controlled, directly or indirectly, by any other corporation more than
one-fourth of whose capital stock is owned or voted by aliens or their
representatives, by foreign governments or their representatives, or by non-U.S.
corporations. These restrictions apply in modified form to other forms of
business organizations, including partnerships and limited liability companies.
We therefore may be restricted from having more than one-fourth of our stock
owned or voted by aliens, foreign governments or non-U.S. corporations.

     The Communications Act and FCC rules also generally restrict the common
ownership, operation or control of radio broadcast stations serving the same
local market, of a radio broadcast station and a television broadcast station
serving the same local market, and of a radio broadcast station and a daily
newspaper serving the same local market. Under these "cross-ownership" rules, we
generally would not be permitted to acquire any daily newspaper in a local
market where we then owned any radio station, or to acquire any television
station (other than low power television) in certain smaller local markets where
we then owned more than one radio station.

     In response to the Telecommunications Act, the FCC amended its multiple
ownership rules to eliminate the national limits on ownership of AM and FM
stations. The FCC's broadcast multiple ownership rules restrict the number of
radio stations one person or entity may own, operate or control on a local
level. These limits, as specified in the Telecommunications Act, are:

     - in a market with 45 or more operating 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);

     - in a market with between 30 and 44 (inclusive) operating commercial radio
       stations, an entity may own up to seven commercial radio stations, not
       more than four of which are in the same service;

     - in a market with between 15 and 29 (inclusive) operating commercial radio
       stations, an entity may own up to six commercial radio stations, not more
       than four of which are in the same service;

     - in a market with 14 or fewer operating 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.

     None of these multiple ownership rules requires any change in our current
ownership of radio broadcast stations; however, these rules will limit the
number of additional stations that we may acquire in the future in certain of
our markets.

     The FCC has issued a notice of proposed rulemaking that contemplates
re-defining the term "market" for purposes of its multiple ownership rules. The
proposed rules, if adopted, could restrict our ability to obtain FCC consents
for certain future acquisitions in markets in which we currently own stations.
If the proposed rules were to be applied retroactively, which the FCC has
proposed not to do, it could require a change in our current ownership of radio
broadcast stations.

     Because of these multiple and cross-ownership rules, a purchaser of stock
or debt of the company that acquires an "attributable" interest in the company
may violate the FCC's rule if it also has an attributable interest in other
television or radio stations, or in daily newspapers, depending on the number
and location of those radio or television stations or daily newspapers. Such a
purchaser also may be restricted in the other companies in which it may invest,
to the extent that these investments give rise to an attributable interest. If
an attributable stockholder or debt holder of the company violates any of these
ownership rules,

                                        78


the company may be unable to obtain from the FCC one or more authorizations
needed to conduct its radio station business and may be unable to obtain FCC
consents for certain future acquisitions.

     The FCC generally applies its television/radio/newspaper cross-ownership
rules and its broadcast multiple ownership rules by considering the
"attributable," or cognizable, interests held by a person or entity. A person or
entity can have an interest in a radio station, television station or daily
newspaper by being an officer, director, partner, member, stockholder, or lender
of a company that owns that station or newspaper, or by being an officer,
director, partner, member, stockholder, or lender of any parent company of the
company that owns that station or newspaper. Whether that interest is cognizable
under the FCC's ownership rules is determined by the FCC's attribution rules. If
an interest is attributable, the FCC treats the person or entity who holds that
interest as an "owner" of the radio station, television station or daily
newspaper in question, and therefore subject to the FCC's ownership rules.

     Persons or entities which hold more than 33% of the total asset value
(combined equity and debt) of a company and are either "major program suppliers"
of the company or hold "attributable" interests in media in the same market as
the company, generally are attributed with an ownership interest in radio
stations, television stations and daily newspapers owned by the company, or
owned by any other company in which the company holds an interest (the
equity/debt plus rule).

     With respect to a corporation, officers and directors and persons or
entities that directly or indirectly can vote 5% or more of the corporation's
stock (20% or more of such stock in the case of insurance companies, investment
companies, bank trust departments which act as "passive investors" that hold
such stock for investment purposes only) generally are attributed with an
ownership interest in radio stations, television stations and daily newspapers
owned by the corporation or owned by any company in which the corporation holds
an interest.

     With respect to a partnership, the interest of a general partner is
attributable, as is the interest of any limited partner who is "materially
involved" in the media-related activities of the partnership. With respect to a
limited liability company, the interest of a member is attributable unless the
member is not "materially involved" in the media-related activities of the
company. Nonvoting stock, options and warrants for voting stock that have not
yet been exercised, limited partnership interests where the limited partner is
not "materially involved" in the media-related activities of the partnership,
membership interests where the member is not "materially involved" in the
media-related activities of the limited liability company, and minority (under
5%) voting stock generally do not subject their holders to attribution unless
the equity/debt plus rule applies.

     PROGRAMMING AND OPERATION. The Communications Act requires broadcasters to
serve the "public interest." The FCC has gradually relaxed or eliminated many of
the more formalized procedures it had developed in the past to promote the
broadcast of certain types of programming responsive to the needs of a station's
community of license. Licensees continue to be required, however, to present
programming that is responsive to community problems, needs and interests and to
maintain certain records demonstrating such responsiveness. Complaints from
listeners concerning a station's programming will be considered by the FCC when
it evaluates the licensee's renewal application, but such complaints may be
filed and considered at any time.

     Stations also must pay regulatory and application fees and follow various
FCC rules that regulate, among other things, political advertising, the
broadcast of obscene or indecent programming, sponsorship identification,
technical operations (including limits on radio frequency radiation) and equal
employment opportunity requirements. The broadcast of contests and lotteries is
regulated by FCC 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.

                                        79


     LOCAL MARKETING AGREEMENTS. Over the past several years, a number of radio
stations, including certain of our stations, have entered into "time brokerage
agreements" of the type which are commonly referred to as "local marketing
agreements." These LMAs take various forms. Separately-owned and licensed
stations may agree to function cooperatively in terms of programming,
advertising sales and other matters, subject to compliance with the antitrust
laws and the FCC's rules and policies, including the requirement that the
licensee of each station maintains independent control over the programming and
other operations of its own station. The FCC has held that such agreements do
not violate the Communications Act as long as the licensee of the station that
is being substantially programmed by another entity maintains complete
responsibility for, and control over, operations of its broadcast stations and
otherwise ensures compliance with applicable FCC rules and policies.

     A station that brokers substantial time on another station in its market or
engages in an LMA with a station in the same market will be considered to have
an attributable ownership interest in the brokered station for purposes of the
FCC's ownership rules. As a result, a broadcast station may not enter into an
LMA that allows it to program more than 15% of the broadcast time, on a weekly
basis, of another local station that it could not own under the FCC's local
multiple ownership rules. FCC rules also prohibit the broadcast licensee from
simulcasting more than 25% of its programming on another station in the same
broadcast service (that is, AM-AM or FM-FM) where the two stations serve
substantially the same geographic area, whether the licensee owns the stations
or owns one and programs the other through an LMA arrangement.

     PROPOSED CHANGES. The Congress and the FCC from time to time have under
consideration, and may in the future consider and adopt, new laws, regulations
and policies regarding a wide variety of matters that could, directly or
indirectly, affect the operation, ownership and profitability of the company's
radio stations, result in the loss of audience share and revenue for the
company's radio stations, and affect the ability of the company to acquire
additional radio stations or finance such acquisitions. Such matters include:

     - proposals to impose spectrum use or other fees on FCC licensees;

     - the FCC's equal employment opportunity rules and matters relating to
       political broadcasting;

     - technical and frequency allocation matters;

     - changes in multiple ownership and cross-ownership rules;

     - changes to broadcast technical requirements;

     - proposals to allow telephone or cable television companies to deliver
       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, instead of granting FCC licenses and subsequent license
       renewals without such bidding.

     The FCC has issued a notice of proposed rulemaking that contemplates
re-defining the term "market" for purposes of its multiple ownership rules. The
proposed rules, if adopted, could restrict our ability to obtain FCC consents
for certain future acquisitions in markets in which we currently own stations.
If the proposed rules were to be applied retroactively, which the FCC has
proposed not to do, it could require a change in our current ownership of radio
broadcast stations.

     A substantial portion of the FCC's equal employment opportunity rules have
recently been held unconstitutional by the United States Court of Appeals for
the District of Columbia.

                                        80


     We cannot predict whether any proposed changes will be adopted or what
other matters might be considered in the future, nor can we judge in advance
what impact, if any, the implementation of any of these proposals or changes
might have on our business.

     The FCC, on April 2, 1997, awarded two licenses for the provision of
satellite digital radio services. The licensees have announced plans to launch
service in the near future. The services will be subscription services. Certain
Salem stations will be carried on one of the services.

     Digital technology also may be used in the future by terrestrial radio
broadcast stations either on existing or alternate broadcasting frequencies, and
the FCC has stated that it will consider making changes to its rules to permit
AM and FM radio stations to offer digital sound following industry analysis of
technical standards.

     The FCC has authorized an additional 100 kHz of bandwidth for the AM band
and on March 17, 1997, adopted an allotment plan for the expanded band that
identified the 88 AM radio stations selected to move into the band. At the end
of a five-year transition period, those licensees will be required to return to
the FCC either the license for their existing AM band station or the license for
the expanded AM band station. We have received two expanded band authorizations,
one for KBJD-AM, paired with KRKS-AM, Denver-Boulder, Colorado, and one for
KAZJ-AM, paired with KLFE-AM, Seattle-Tacoma, Washington.

     The foregoing summary of certain provisions of the Communications Act and
of specific FCC rules and policies does not purport to be comprehensive. For
further information concerning the nature and extent of federal regulation of
radio broadcast stations you should refer to the Communications Act, the FCC's
rules and the public notices and rulings of the FCC.

     FEDERAL ANTITRUST CONSIDERATIONS. The FTC and the DOJ, which evaluate
transactions to determine whether those transactions should be challenged under
the federal antitrust laws, have been increasingly active in the past few years
in their review of radio station acquisitions, particularly where an operator
proposes to acquire additional stations in its existing markets.

     For an acquisition meeting certain size thresholds, the Hart-Scott-Rodino
Improvements Act ("HSR Act") and the rules promulgated thereunder require the
parties to file Notification and Report Forms with the FTC and the DOJ and to
observe specified waiting period requirements before consummating the
acquisition. At any time before or after the consummation of a proposed
acquisition, the FTC or the DOJ could take such action under the antitrust laws
as it deems necessary or desirable in the public interest, including seeking to
enjoin the acquisition or seeking divestiture of the business acquired or other
assets of the company. Acquisitions that are not required to be reported under
the HSR Act may be investigated by the FTC or the DOJ under the antitrust laws
before or after consummation. In addition, private parties may under certain
circumstances bring legal action to challenge an acquisition under the antitrust
laws.

     As part of its increased scrutiny of radio station acquisitions, the DOJ
has stated publicly that it believes that LMAs and other similar agreements
customarily entered into in connection with radio station transfers prior to the
expiration of the waiting period under the HSR Act could violate the HSR Act.

     Although we do not believe that our acquisition strategy as a whole will be
adversely affected in any material respect by antitrust review, we cannot be
sure that this will be the case.

                                        81


                                   MANAGEMENT

EXECUTIVE AND OTHER KEY OFFICERS AND DIRECTORS

     The executive officers, directors and key employees of Parent and Salem
Holding, their ages and positions with Parent and Salem Holding are as follows:




                NAME                   AGE                           POSITION
                ----                   ---                           --------
                                        
Stuart W. Epperson...................  64     Chairman of the Board
Edward G. Atsinger III...............  61     President, Chief Executive Officer and Director
Eric H. Halvorson....................  52     Director
Roland S. Hinz.......................  62     Director
Donald P. Hodel......................  66     Director
Richard A. Riddle....................  57     Director
David Davenport......................  51     Director
Joe D. Davis.........................  57     Executive Vice President, Radio
David A.R. Evans.....................  39     Senior Vice President and Chief Financial Officer
Russell R. Hauth.....................  60     Senior Vice President, Administration and Public
                                              Affairs
George Toulas........................  50     Senior Vice President, Special Projects
Jonathan L. Block....................  34     Vice President, General Counsel and Secretary
Eileen E. Hill.......................  38     Vice President, Finance and Accounting
Roger Kemp...........................  44     Vice President, National Program Development and
                                              Ministries Relations
Rob Adair............................  49     Vice President, Operations
Dave Armstrong.......................  56     Vice President, Operations and General
                                              Manager/KKLA-FM, KLTH-AM, KLTX-AM and KIEV-AM
Kenneth L. Gaines....................  62     Vice President, Operations
David Ruleman........................  54     Vice President, Operations and General
                                              Manager/WAVA-FM, WITH-AM and WABS-AM
Greg R. Anderson.....................  54     President of Salem Radio Network
James R. Cumbee......................  48     President of Non-Broadcast Media



     Set forth below is certain information concerning the business experience
during the past five years of each of the individuals named above.

     Mr. Atsinger has been President, Chief Executive Officer and a director of
Parent and Salem Holding since their inceptions. He has been engaged in the
ownership and operation of radio stations since 1969 and is a member of the
board of directors of the National Religious Broadcasters.

     Mr. Epperson has been Chairman of Parent since its inception and Salem
Holding since May 2001. Mr. Epperson has been engaged in the ownership and
operation of radio stations since 1961. In addition, he is a member of the board
of directors of the National Religious Broadcasters. Mr. Epperson is married to
Nancy A. Epperson who is Mr. Atsinger's sister.

     Mr. Halvorson has been a director of Parent since 1988 and Salem Holding
since May 2001. Mr. Halvorson is currently a Visiting Lecturer at Pepperdine
University. Mr. Halvorson was our Chief Operating Officer from 1995 to 2000 and
our Executive Vice President from 1991 to 2000. From 1991 to 2000, Mr. Halvorson
also served as our General Counsel. Mr. Halvorson was the managing partner of
the law firm of Godfrey & Kahn, S.C.-Green Bay from 1988 until 1991. From 1985
to 1988, he was our Vice President and General Counsel. From 1976 until 1985, he
was an associate and then a partner of Godfrey & Kahn, S.C.-Milwaukee. Mr.
Halvorson was a Certified Public Accountant with Arthur Andersen & Co. from 1971
to 1973.

                                        82


     Mr. Hinz has been a director of Parent since 1997 and Salem Holding since
May 2001. Mr. Hinz has been the owner, President and Editor-in-Chief of
Hi-Torque Publishing Company, a publisher of magazines covering the motorcycling
and biking industries, since 1981. Mr. Hinz is also the managing member of
Hi-Favor Broadcasting, LLC, the licensee of radio station KLTX-AM, Long Beach,
California, which was acquired from one of our subsidiaries in August 2000, as
described in the section of this prospectus entitled "Related Party
Transactions -- KLTX-AM". He is active in a number of non-profit organizations
and serves as Chairman of the Fund Development Committee of English Language
Institute China. Mr. Hinz also serves on the board of directors of the
Association of Community Education, Inc. a not-for-profit corporation operating
radio station KLTX-AM, Long Beach, California. Mr. Hinz also serves on the
boards of directors of Gordon Conwell Theological Seminary, Truth for Life, and
Lake Avenue Congregational Church.

     Mr. Hodel has been a director of Parent since May 1999 and Salem Holding
since May 2001. Mr. Hodel is a founder and has been the Managing Director of
Summit Group International, Ltd., an energy and natural resources consulting
firm, since 1989. He has served as Vice Chairman of Texon Corporation, an oil
and natural gas marketing company, since 1994. Mr. Hodel served as President of
the Christian Coalition from June 1997 to January 1999 and as Executive Vice
President of Focus on the Family from January 1996 to August 1996. Mr. Hodel
currently serves on the boards of directors of Integrated Electrical Services,
Inc., Eagle Publishing, Inc. and Focus on the Family. During the Reagan
Administration, Mr. Hodel served as Secretary of Energy and Secretary of the
Interior.


     Mr. Riddle has been a director of Parent since September 1997 and Salem
Holding since May 2001. Mr. Riddle is an independent businessman specializing in
providing financial assistance and consulting to manufacturing companies. Since
1991 he has been the President of Richray Industries, a holding company for
various manufacturing companies. He was President and majority stockholder of I.
L. Walker Company from 1988 to 1997 when the company was sold. He also was Chief
Operating Officer and majority stockholder of Richter Manufacturing from 1970 to
1987.



     Mr. Davenport has been a director of Parent and Salem Holding since
November 2001. Mr. Davenport has been a research fellow at the Hoover
Institution since August 2001. Mr. Davenport was the chief executive officer of
Starwire Corporation, a software service company formerly known as
Christianity.com, from June 2000 to June 2001. Mr. Davenport served as president
of Pepperdine University from 1985 to 2000 and, from 1980 through 1985, he also
served as a professor of law, general counsel, and executive vice president of
the university.



     Mr. Davis has been Executive Vice President, Radio of Parent and Salem
Holding since October 2001. Previously, Mr. Davis served as Senior Vice
President, Operations of Parent and Salem Holding since August 2000. Prior to
that time Mr. Davis was General Manager of WMCA-AM since 1989 and Vice
President, Operations since 1996. He was also the General Manager of WWDJ-AM
since 1994. He has previously served as Vice President and Executive Director of
Christian Fund for the Disabled as well as President of Practice Resources,
Inc., Davis Eaton Corporation and Vintage Specialty Advertising company.


     Mr. Evans has been Senior Vice President and Chief Financial Officer of
Parent and Salem Holding since September 2000. From 1997 to 2000 Mr. Evans
served as Senior Vice President and Managing Director -- Europe, Middle East,
Africa of Warner Bros. Consumer Products in London, England. He also served at
Warner Bros. Consumer Products in Los Angeles, California, as Senior Vice
President -- Latin America, International Marketing, Business Development from
1996 to 1997 and Vice President -- Worldwide Finance, Operations, Business
Development from 1992 to 1996. From 1990 to 1992 he served as Regional Financial
Controller -- Europe of Warner Bros. in London, England. Prior to 1990, Mr.
Evans was an audit manager with Ernst & Young LLP in Los Angeles and worked as a
U.K. Chartered Accountant for Ernst & Young LLP in London.

     Mr. Hauth has been Senior Vice President, Administration and Public Affairs
of Parent and Salem Holding since May 2001. From January 1998 to May 2001, Mr.
Hauth was Vice President for Public Affairs of Parent. Prior to 1998, Mr. Hauth
was President of Hauth Associates, a consulting firm which

                                        83


has served us since 1985 in executive selection and business planning.
Concurrently, Mr. Hauth has served as Executive Director of the National
Religious Broadcasters' Music License Committee since 1987.

     Mr. Toulas has been Senior Vice President, Special Projects of Parent and
Salem Holding since August 2000. Mr. Toulas was Senior Vice President of the
Saturn Division of Chancellor Media Corporation from 1997 to 2000. Prior to that
time, Mr. Toulas spent 10 years with American Media Inc., where he held
management positions at WOCL-FM in Orlando, Florida, WUBE-FM in Cincinnati, Ohio
and WLIF-FM in Baltimore, Maryland.

     Mr. Block has been General Counsel and Secretary of Parent since May 2000
and Salem Holding since its inception. He has been a Vice President since 1999
and our Secretary since 1997. From 1995 to 2000 Mr. Block served as our
Associate General Counsel. Prior to 1995, Mr. Block was an associate at the law
firm of Bothel, Long & McKisson in San Francisco, California. From 1998 to 2000,
Mr. Block taught business law at Pepperdine University.

     Ms. Hill has been Vice President, Finance and Accounting of Parent and
Salem Holding since August 2000. From 1997 to 2000 she served as our Vice
President and Controller. She was Controller from 1996 to 1997. Ms. Hill joined
Parent in 1994 as Accounting/Tax Manager. Prior to 1994, Ms. Hill was a
Certified Public Accountant for the tax department of Ernst & Young LLP.

     Mr. Kemp has been Vice President, National Program Development and Ministry
Relations of Parent since August 1998 and of Salem Holding since May 2001. From
1991 to August 1998, Mr. Kemp was Senior Vice President at Insight for Living in
Anaheim, California. From 1979 to 1991 Mr. Kemp was Creative Director for
Ambassador Advertising Agency. Concurrently, Mr. Kemp has served on the board of
directors of the National Religious Broadcasters in Manassas, Virginia since
1997.

     Mr. Adair has been Vice President, Operations of Parent and Salem Holding
since August 2000. Prior to working for us, Mr. Adair was Senior Vice President
at Renda Broadcasting for ten years. Prior to that time, Mr. Adair held sales
and management positions in Oklahoma City with WKY Radio, KTOK Radio and the
Oklahoma State University Sports Network.

     Mr. Armstrong has been Vice President, Operations of Parent since 1996 and
Salem Holding since May 2001. He has been the General Manager of KKLA-FM and
KLTH-AM since 1994. He has also supervised operations of KLTX-AM since 1997 and
of KIEV-AM since 1998. Mr. Armstrong has 28 years of radio broadcast experience
and has been general manager of stations in Santa Ana and Orange, California.

     Mr. Gaines has been Vice President, Operations of Parent since 1994 and
Salem Holding since May 2001. Prior to that time, he served as General Manager
of KKLA-FM from 1992 to 1994 and General Manager of WYLL-FM from 1990 to 1992.
Mr. Gaines has been involved in the management of radio stations since 1964. He
served as Executive Vice President of Commonwealth Communications from 1988 to
1990, Vice President of Penn Communications from 1985 to 1988, Executive Vice
President of Broadstreet Communications from 1974 to 1985 and Vice President and
General Manager of Metromedia from 1964 to 1974.

     Mr. Ruleman has been Vice President, Operations of Parent since 1999 and
Salem Holding since May 2001. He has been General Manager of WAVA-FM since 1992,
WITH-AM since 1997 and WABS-AM since 2000. He was General Manager of KPRZ-AM
from 1986 to 1992. From 1973 to 1986, Mr. Ruleman served as Vice President of
Palomar Broadcasting Corporation, a group owner of radio stations in Southern
California.

     Mr. Anderson has been President of Salem Radio Network(R) since 1994. From
1993 to 1994, Mr. Anderson was the Vice President-General Manager of the
network. Mr. Anderson was employed by Multimedia, Inc. from 1980 to 1993. After
serving as general manager at Multimedia stations in Greenville, South Carolina,
Shreveport, Louisiana and Milwaukee, Wisconsin, he was named Vice

                                        84


President, Operations, of the Multimedia radio division in 1987 and was
subsequently appointed as Executive Vice President and group head of
Multimedia's radio division.

     Mr. Cumbee has been the President of Non-Broadcast Media of Parent since
January 2000 and Salem Holding since May 2001. He was the President of Reach
Satellite Network, Inc. in Nashville, Tennessee from 1996 through 1999. We
purchased all of the shares of stock of Reach Satellite Network, Inc. in March
2000, as described in the section of this prospectus entitled "Related Party
Transactions -- Reach Satellite Network." From 1990 to 1996 Mr. Cumbee served as
Vice President of Disney Vacation Development Company.

COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS

     COMPENSATION OF EXECUTIVE OFFICERS. The following table sets forth all
compensation paid for 2000, 1999, and 1998 (as applicable) to our Chief
Executive Officer and our four highest paid executive officers serving as of
December 31, 2000 plus Eric H. Halvorson who would have been among the four
highest paid executives but is no longer serving as an executive officer (the
"Named Executive Officers").

                           SUMMARY COMPENSATION TABLE




                                                           ANNUAL COMPENSATION
                                                           --------------------     ALL OTHER
          NAME AND PRINCIPAL POSITIONS             YEAR     SALARY      BONUS      COMPENSATION
          ----------------------------             ----    --------    --------    ------------
                                                                       
Edward G. Atsinger III...........................  2000    $500,000    $     --     $       --
  President, Chief Executive Officer and Director  1999     516,667          --             --
                                                   1998     400,000     250,000             --
Stuart W. Epperson...............................  2000     500,000          --             --
  Chairman of the Board                            1999     516,667          --             --
                                                   1998     400,000     288,000             --
Eric H. Halvorson................................  2000     280,962(1)       --          1,325(2)
  Director and Former Executive Vice President,    1999     358,333     100,000      1,739,384(3)
  Chief Operating Officer and General Counsel      1998     285,000      87,500            570(2)
Joe D. Davis.....................................  2000     226,345      40,000          2,550(2)
  Executive Vice President, Radio                  1999     184,486      35,000          2,550(2)
                                                   1998     172,362      20,000            329(2)
Dave Armstrong...................................  2000     210,739      20,000          2,500(2)
  Vice President, Operations                       1999     207,212      40,000          2,500(2)
                                                   1998     175,658      38,000            876(2)
Greg R. Anderson.................................  2000     176,465      40,000          2,550(2)
  President of Salem Radio Network                 1999     171,888      10,000          2,550(2)
                                                   1998     162,300          --          1,000(2)



-------------------------
(1) Includes payment of accrued vacation paid in connection with the termination
    of employment.

(2) Represents employer matching contributions to individuals' 401(k) accounts.

(3) Includes employer matching contributions to Mr. Halvorson's 401(k) account,
    a grant of 75,000 shares of Class A common stock at fair market value of
    $900,000 and a cash bonus paid equal to the individual income tax liability
    incurred by Mr. Halvorson in connection with the stock grant.

  COMPENSATION OF DIRECTORS

     Directors' Fees. Officers who also serve as directors do not receive
compensation for their services as directors other than the compensation they
receive as our officers. Directors who are not also officers or employees
receive $2,500 for attending each regular or special meeting of the board of
directors and $500 for attending each regular or special meeting of any
committee established by the board of directors

                                        85


(unless such committee meeting is held on the same day as a regular or special
meeting of the board of directors). Our directors are entitled to reimbursement
of their reasonable out-of-pocket expenses in connection with their travel to
and attendance at board meetings.

     Stock Option Grants. Directors who are not also our officers or employees
were granted 2,000 options each on September 6, 2000 to purchase shares of
Parent's Class A common stock for their services as directors. These options
vest after one year.

  STOCK OPTION GRANTS

     The following table sets forth information regarding grants of stock
options under our 1999 Stock Incentive Plan during 2000 to Named Executive
Officers.

                       OPTION GRANTS IN LAST FISCAL YEAR



                                                    INITIAL GRANTS
                                 ----------------------------------------------------
                                 NUMBER OF
                                 SHARES OF                                               POTENTIAL REALIZABLE
                                  CLASS A      PERCENT OF                                  VALUE OF ASSUMED
                                   COMMON        TOTAL                                  ANNUAL RATES OF STOCK
                                   STOCK        OPTIONS                                 PRICE APPRECIATION FOR
                                 UNDERLYING    GRANTED TO    EXERCISE OR                     OPTION TERM
                                  OPTIONS     EMPLOYEES IN   BASE PRICE    EXPIRATION   ----------------------
             NAME                GRANTED(#)   FISCAL YEAR      ($/SH)         DATE        5%($)       10%($)
             ----                ----------   ------------   -----------   ----------   ---------   ----------
                                                                                  
Edward G. Atsinger III.........        --          --              --              --         --           --
Stuart W. Epperson.............        --          --              --              --         --           --
Eric H. Halvorson..............        --          --              --              --         --           --
Joe D. Davis...................    10,000         9.1%         $11.81      09/06/2010    $74,288     $188,261
Dave Armstrong.................        --          --              --              --         --           --
Greg R. Anderson...............        --          --              --              --         --           --


  EMPLOYMENT AGREEMENTS

     Edward G. Atsinger III and Stuart W. Epperson entered into employment
agreements with Salem Holding effective as of July 1, 2001, replacing existing
employment agreements effective since May 19, 1999, pursuant to which Mr.
Atsinger will serve as President and Chief Executive Officer and Mr. Epperson
will serve as chairman for an initial period expiring July 1, 2004. Pursuant to
the employment agreements, effective as of July 1, 2001, the annual base salary
payable to Messrs. Atsinger and Epperson is $530,000, increasing to $700,000 on
January 1, 2002. Messrs. Atsinger and Epperson also received a signing bonus of
$300,000 and $200,000, respectively, in connection with the execution of their
new employment agreements. Messrs. Atsinger and Epperson are also eligible to
receive an annual merit bonus in an amount to be determined at the discretion of
our board of directors; in addition, Mr. Atsinger is eligible to receive a
further bonus, in an amount to be determined in the discretion of the board of
directors, if the Company achieves after tax cash flow of $1.01 for 2001.
Messrs. Atsinger's and Epperson's employment agreements provide that, in the
event of a termination of employment without cause (or a constructive
termination) during the initial term of employment, we will pay a severance
benefit in the form of salary continuation payments for the longer of six months
or the remainder of the initial term, plus accrued bonus through the date of
termination. Following the initial term of employment, a termination of
employment without cause (or a constructive termination) or our failure to renew
the initial or any subsequent term of employment for an additional annual term
would entitle Messrs. Atsinger and Epperson to three months of severance plus
accrued bonus through the date of termination.

                                        86


     Additionally, the employment agreements with Messrs. Atsinger and Epperson
provide us with a right of first refusal on corporate opportunities, which
includes acquisitions of radio stations in any market in which we are
interested, and includes a noncompete provision for a period of two years from
the cessation of employment with us and a nondisclosure provision which is
effective for the term of the employment agreement and indefinitely thereafter.

     Eric H. Halvorson entered into an employment agreement with Parent pursuant
to which he served as Executive Vice President. Effective as of January 1, 2000
his annual salary was $350,000. His employment agreement had a term through
December 2003. Mr. Halvorson resigned as an employee on August 15, 2000 and he
terminated his employment agreement. Mr. Halvorson is a consultant under a
consulting agreement. See "Related Party Transactions -- Consulting Agreement
with Eric H. Halvorson."

  401(K) PLAN

     We adopted a 401(k) savings plan in 1993 for the purpose of providing, at
the option of the employee, retirement benefits to our full-time employees.
Participants are allowed to make nonforfeitable contributions to the savings
plan of up to 15% of their annual salary, but may not exceed the annual maximum
contribution limitations established by the Internal Revenue Service. We
currently match 25% of the amounts contributed by each participant but do not
match participants' contributions in excess of 6% of their compensation per pay
period. We made a contribution of $320,000 to the 401(k) savings plan during
2000.

                                        87


         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth information regarding the beneficial
ownership of Parent's Class A and Class B common stock as of August 1, 2001, by
(i) each person believed by us to be the beneficial owner of more than 5% of
either class of the outstanding Class A or Class B common stock, (ii) each
director of Parent and Salem Holding, (iii) each of the Named Executive Officers
and (iv) all directors and executive officers of Parent as a group. Parent owns
100% of the capital stock of Salem Holding.




                                                                                         PERCENT OF
                                            CLASS A                   CLASS B             VOTES OF
                                          COMMON STOCK              COMMON STOCK         ALL CLASSES
                                     ----------------------    ----------------------     OF COMMON
        NAME AND ADDRESS(1)           NUMBER      % VOTE(2)     NUMBER      % VOTE(2)     STOCK(2)
        -------------------          ---------    ---------    ---------    ---------    -----------
                                                                          
Stuart W. Epperson.................  4,317,029(3)   24.11%     2,776,848(4)   50.00%        43.69%
Nancy A. Epperson..................  4,317,029(3)   24.11%     2,776,848(4)   50.00%        43.69%
Edward G. Atsinger III.............  4,545,530(5)   25.39%     2,776,848(5)   50.00%        44.00%
Eric H. Halvorson..................     11,500(6)       *             --         --             *
Roland S. Hinz.....................    147,971(7)       *             --         --             *
Donald P. Hodel....................      4,000(8)       *             --         --             *
Richard A. Riddle..................     59,667(9)       *             --         --             *
Joe D. Davis.......................      7,500(10)       *            --         --             *
Dave Armstrong.....................      4,100(11)       *            --         --             *
Greg R. Anderson...................      4,500(12)       *            --         --             *
Liberty Wanger Asset Management,
  L.P.(13).........................  1,809,000       10.1%            --         --          2.46%
  227 West Monroe St., Suite 3000
  Chicago, IL 60602
Goldman Sachs Asset
  Management(14)...................  1,138,600        6.4%            --         --          1.55%
  32 Old Slip
  New York, NY 10005
All directors and executive
  officers as a group (20
  persons).........................  9,146,254(15)   51.09%    5,553,696     100.00%        88.08%



-------------------------
  * Less than 1%.

 (1) Except as otherwise indicated, the address for each person is c/o Salem
     Communications Corporation, 4880 Santa Rosa Road, Suite 300, Camarillo,
     California 93012. Calculated pursuant to Rule 13d-3(d) under the Exchange
     Act. Shares of Class A common stock not outstanding that are subject to
     options exercisable by the holder thereof within 60 days of April 1, 2001
     are deemed outstanding for the purposes of calculating the number and
     percentage owned by such stockholder, but not deemed outstanding for the
     purpose of calculating the percentage owned by each other stockholder
     listed. Unless otherwise noted, all shares listed as beneficially owned by
     a stockholder are actually outstanding.

 (2) Percentage voting power is based upon 17,902,392 shares of Class A common
     stock and 5,553,696 shares of Class B common stock of Parent, all of which
     were outstanding as of April 1, 2001, and the general voting power of one
     vote for each share of Class A common stock and ten votes for each share of
     Class B common stock.

 (3) Includes shares of Class A common stock held by a trust of which Mr.
     Epperson is trustee and shares held directly by Mr. Epperson. As husband
     and wife, Mr. and Mrs. Epperson are each deemed to be the beneficial owner
     of shares held by the other and, therefore their combined beneficial
     ownership is shown in the table.

                                        88


 (4) Includes shares of Class B common stock held directly by Mr. Epperson and
     shares held directly by Mrs. Epperson.

 (5) These shares of Class A and Class B common stock are held by trusts of
     which Mr. Atsinger is trustee.

 (6) These shares of Class A common stock are held by trusts for which Mr.
     Halvorson and his wife are trustees. Includes 9,000 shares of Class A
     common stock subject to options that are exercisable within 60 days.

 (7) Includes 44,444 shares of Class A common stock held by a trust for which
     Mr. Hinz and his wife are trustees, 1,411 shares held by his wife and 444
     shares held by his son. Mr. Hinz disclaims beneficial ownership of shares
     of Class A common stock held by his wife and his son. Includes 6,000 shares
     of Class A common stock subject to options that are exercisable within 60
     days.

 (8) Includes 4,000 shares of Class A common stock subject to options that are
     exercisable within 60 days.

 (9) Includes 44,778 shares of Class A common stock held by a trust for which
     Mr. Riddle is trustee. Includes 6,000 shares of Class A common stock
     subject to options that are exercisable within 60 days.


(10) Includes 6,500 shares of Class A common stock subject to options that are
     exercisable within 60 days.



(11) Includes 4,000 shares of Class A common stock subject to options that are
     exercisable within 60 days.



(12) Includes 4,000 shares of Class A common stock subject to options that are
     exercisable within 60 days.



(13) This information is based on a Schedule 13G filed by Liberty Wanger Asset
     Management, L.P. (and certain affiliates hereafter described) with the
     Commission on February 14, 2001. Liberty Wanger Asset Management, L.P.
     reported that as of such date it was the beneficial owner of 1,809,000
     shares of our issued and outstanding Class A common stock which were
     acquired on behalf of Liberty Wanger Asset Management, L.P.'s discretionary
     clients, including Liberty Acorn Trust. Of the 1,809,000 shares, Liberty
     Acorn Trust was the beneficial owner of 1,183,100 shares. WAM Acquisition
     GP, Inc. is the general partner of Liberty Wanger Asset Management, L.P.
     and also the beneficial owner of all 1,809,000 shares.



(14) This information is based on a Schedule 13G filed by Goldman Sachs Asset
     Management with the Commission on February 13, 2001.



(15) Includes 39,000 shares of Class A common stock subject to options that are
     exercisable within 60 days.


                                        89


                           RELATED PARTY TRANSACTIONS

LEASES WITH PRINCIPAL STOCKHOLDERS

     We lease certain studio, tower and antenna sites from Messrs. Atsinger and
Epperson or trusts and partnerships created for the benefit of Messrs. Atsinger
and Epperson and their families. All such leases have cost of living
adjustments. Based upon our management's assessment and analysis of local market
conditions for comparable properties, we believe that such leases do not have
terms that vary materially from those that would have been available from
unaffiliated parties. These leases in effect as of August 2001 are summarized as
follows:



                                                                           CURRENT
                                     STATION                                ANNUAL     EXPIRATION
             MARKET                CALL LETTERS     FACILITIES LEASED       RENTAL      DATE(1)
             ------                ------------   ---------------------   ----------   ----------
                                                                           
LEASES WITH BOTH MESSRS. ATSINGER AND EPPERSON:
Chicago, IL......................  WYLL-FM            Antenna/Tower       $  128,625      2009
San Francisco, CA................  KFAX-AM            Antenna/Tower          152,700      2003
Philadelphia, PA.................  WFIL-AM/       Antenna/Tower/Studios      117,516      2004
                                   WZZD-AM
Houston-Galveston, TX............  KKHT-AM            Antenna/Tower           33,744      2005
                                   KTEK-AM            Antenna/Tower           17,604      2008
Seattle-Tacoma, WA...............  KGNW-AM            Antenna/Tower           38,196      2002
                                   KLFE-AM            Antenna/Tower           27,768      2004
Minneapolis-St. Paul, MN.........  KKMS-AM/       Tower/Antenna/Studios      141,624      2006
                                   KYCR-AM
Pittsburgh, PA...................  WORD-FM            Antenna/Tower           28,464      2003
Denver-Boulder, CO...............  KNUS-AM            Antenna/Tower           19,716      2006
                                   KRKS-AM            Antenna/Tower           60,000      2009
Cleveland, OH....................  WHK-AM             Antenna/Tower           35,724      2008
Portland, OR.....................  KPDQ-AM/FM        Office/Studios           64,644      2002
                                   KPDQ-AM/FM         Antenna/Tower           14,688      2002
Cincinnati, OH...................  WTSJ-AM            Antenna/Tower           12,756      2007
Sacramento, CA...................  KFIA-AM            Antenna/Tower           86,496      2006
San Antonio, TX..................  KSLR-AM            Antenna/Tower           34,730      2007
                                   KSLR-AM            Antenna/Tower            9,000      2009
Akron, OH........................  WHLO-AM            Antenna/Tower           12,756      2007
                                                                          ----------
                                                                          $1,036,751
                                                                          ==========
LEASE WITH MR. ATSINGER:
San Diego, CA....................  KPRZ-AM            Antenna/Tower           49,572      2002
                                                                          ----------
                                                                          $1,086,323
                                                                          ==========


-------------------------
(1) The expiration date reported for certain facilities represents the
    expiration date assuming exercise of lease term extensions at our option.

     Rental expense paid by us to Messrs. Atsinger and Epperson or trusts or
partnerships created for the benefit of their families amounted to approximately
$1.4 million, $1.4 million and $1.0 million for 2000, 1999 and 1998,
respectively. Rental expense paid by us to Mr. Atsinger or trusts created for
the benefit of his family amounted to $49,000, $48,000 and $60,000 for 2000,
1999 and 1998, respectively.

                                        90


CERTAIN LOAN TRANSACTIONS

     On December 31, 2000, Parent loaned Mr. Atsinger $450,000. The loan is
repayable on demand, but in any event, not later than December 31, 2001.
Interest will accrue at the rate of 8% per annum on the unpaid principal.

     In January 1998, Parent borrowed $1.5 million from Mr. Epperson pursuant to
a promissory note with a revolving principal amount of up to $2.5 million. In
May 1998, Parent repaid $1.5 million and there was no outstanding balance on the
note as of December 31, 1998. The note was a demand note which bore interest at
floating rate last set at 8%. The note was cancelled in April 1999.

     In December 1998, Parent borrowed $1.8 million from Mr. Atsinger pursuant
to a promissory note with a revolving principal amount of up to $2.5 million.
The outstanding balance on the note as of December 31, 1998 was $1.8 million.
The note was a demand note which bore interest at a floating rate last set at
8%. Parent repaid this note in full and it was cancelled in April 1999.

     In 1997, Parent purchased split-dollar life insurance policies for its
then-sole shareholders, Messrs. Atsinger and Epperson. Mr. Epperson selected a
policy in the amount of $20.0 million while Mr. Atsinger selected a policy in
the amount of $40.0 million, resulting in a premium difference of $94,000
between the two policies, which difference Parent paid to Mr. Epperson in cash
in the form of an interest-free loan. The loan will be cancelled upon payment by
Mr. Atsinger to Parent of $94,000. In 1998, Parent purchased one-year
split-dollar life insurance policies in the amount of $20.0 million for each of
Messrs. Atsinger and Epperson.

RADIO STATIONS OWNED BY OUR PRINCIPAL STOCKHOLDERS

     Nancy Epperson, the wife of the Chairman of the Board, Stuart W. Epperson,
has personally acquired four radio stations in the Norfolk-Virginia
Beach-Newport News, Virginia market. A company controlled by Mrs. Epperson has
also acquired a radio station in St. Augustine Beach, Florida. Additionally, Mr.
Epperson has acquired certain radio stations in the Greensboro-Winston-Salem,
North Carolina market through a company he controls. These Virginia, Florida and
North Carolina markets are not currently served by stations owned or operated by
us. Acquisitions in such markets are not part of our current business and
acquisition strategies. Under his employment agreement, Mr. Epperson is required
to offer us a right of first refusal of opportunities related to our business.

REACH SATELLITE NETWORK

     In March 2000, we purchased all of the stock of Reach Satellite Network,
Inc. for $3.1 million. Reach Satellite Network owns and operates Solid Gospel, a
radio broadcasting network that produces and distributes music programming to
its own radio stations, WBOZ-FM and WVRY-FM, Nashville, Tennessee, and to
independent radio station affiliates. Reach Satellite Network also owns and
operates SolidGospel.com, a web site on the Internet. James R. Cumbee owned 70%
of the outstanding stock of Reach Satellite Network. Mr. Cumbee became our
President of Non-Broadcast Media effective January 2000.

WGTK-AM

     In October 2000, Salem Holding purchased radio station WGTK-AM, Louisville,
Kentucky, for approximately $1.8 million from Truth Broadcasting Corporation, a
company controlled by our Chairman, Mr. Epperson. At the time of the
acquisition, Salem Holding received an independent appraisal of the radio
station indicating that the price paid for the radio station was no less
favorable to us than would have been available in a comparable transaction in
arm's-length dealing with an unrelated third party.

                                        91


KLTX-AM

     In August 2000, Parent sold radio station KLTX-AM, Long Beach, California,
for $29.5 million to a company owned by Roland S. Hinz, one of our directors.
Parent received a fairness opinion indicating that the sale price for the radio
station was fair from a financial point of view.

KEZY-AM

     In July 2000, Salem Holding entered into an agreement to sell the assets of
radio station KEZY-AM, San Bernardino, California, for $4.0 million to a company
owned by Roland S. Hinz, one of our directors. Salem Holding has obtained the
written report of an independent radio station broker indicating that the sale
price for the radio station is no less favorable to Salem Holding than would be
available in a comparable transaction in arm's-length dealing with an unrelated
third party.

KKOL-AM

     In April 1999, we purchased KKOL-AM, Seattle, Washington for $1.4 million
and the associated real estate and a transmitter site for $400,000 from
Sonsinger, Inc., a corporation owned by Messrs. Atsinger and Epperson. Prior to
the acquisition, pursuant to a local marketing agreement with Sonsinger entered
into on June 13, 1997, we programmed KKOL-AM and sold all the airtime. Under
that local marketing agreement we retained all of the revenue, incurred all of
the expenses related to its operation of KKOL-AM, and incurred approximately
$43,000, $164,000 and $64,000 in local marketing fees under the agreement in
1999, 1998 and 1997, respectively.

TRANSPORTATION SERVICES SUPPLIED BY ATSINGER AVIATION

     From time to time, we rent an airplane and a helicopter from Atsinger
Aviation LLC, which is owned by Mr. Atsinger. As approved by the independent
members of our board of directors, these aircraft are rented on an hourly basis
at below-market rates and used for general corporate needs. In 2000, 1999 and
1998, respectively, we paid Atsinger Aviation $149,000, $156,000 and $69,000,
respectively for such services.

CONSULTING AGREEMENT WITH ERIC H. HALVORSON

     On August 15, 2001, we entered into a consulting agreement with Eric H.
Halvorson, a current director and our former Executive Vice President and Chief
Operating Officer, whereby Mr. Halvorson provides consulting services to us. The
consulting agreement is terminable by either party on two weeks prior notice.
Mr. Halvorson resigned as an employee on August 15, 2000 and he terminated his
employment agreement on the same date. See "Management -- Executive and Other
Key Officers and Directors -- Employment Agreements." Pursuant to his consulting
agreement, Mr. Halvorson is paid an hourly fee and participates with his spouse
in our medical insurance plans, at our cost.

                                        92


                      DESCRIPTION OF EXISTING INDEBTEDNESS

SALEM HOLDING CREDIT FACILITY

     Salem Holding is the borrower under the credit facility. At June 30, 2001,
$52.3 million was outstanding under the credit facility. The credit facility was
amended as of June 15, 2001. The description of the credit facility as set forth
below reflects the terms of the amendment. Upon completion of the offering of
the old notes, the borrowing capacity under the credit facility was decreased
from $225.0 million to $150.0 million and the financial ratio tests were
modified to provide Salem Holding with additional borrowing flexibility. The
credit facility matures on June 30, 2007. Aggregate commitments under the credit
facility begin to decrease commencing March 31, 2002. In June 2001, Salem
Holding used the net proceeds of the offering of the old notes to repay
approximately $145.5 million of borrowings under the credit facility. Salem
Holding repaid approximately $2.8 million of borrowings under the credit
facility with the proceeds it received from the Settlement.

     Amounts outstanding under the credit facility bear interest at a base rate,
at Salem Holding's option, of the bank's prime rate or LIBOR, plus a spread. For
purposes of determining the interest rate under the credit facility, the prime
rate spread ranges from 0% to 1.5%, and the LIBOR spread ranges from 0.875% to
2.75%.

     The maximum amount that Salem Holding may borrow under the credit facility
is limited by a ratio of Parent's consolidated existing total adjusted debt to
pro forma twelve-month cash flow (the "Total Adjusted Funded Debt to Cash Flow
Ratio"). The credit facility will allow us to adjust our total debt as used in
such calculation by the lesser of 50% of the aggregate purchase price of
acquisitions of newly acquired non-religious formatted radio stations that we
reformat to a religious talk, conservative talk or religious music format or
$30.0 million and the cash flow from such stations will not be considered in the
calculation of the ratio. The maximum Total Adjusted Funded Debt to Cash Flow
Ratio allowed under the credit facility is 6.5 to 1 through December 30, 2002.
Thereafter, the maximum ratio will decline periodically until December 31, 2006,
at which point it will remain at 4.25 to 1 through June 2007. The Total Adjusted
Funded Debt to Cash Flow Ratio under the credit facility at March 31, 2001, on a
pro forma basis, was 4.74 to 1, resulting in a borrowing availability of
approximately $45.1 million. The credit facility also requires Parent to
maintain a maximum consolidated total senior leverage ratio of 3.5 to 1.

     The credit facility contains additional restrictive covenants customary for
credit facilities of the size, type and purpose contemplated which, with
specified exceptions, limits our ability to enter into affiliate transactions,
pay dividends, consolidate, merge or effect certain asset sales, make specified
investments, acquisitions and loans and change the nature of our business. The
credit facility also requires us to satisfy specified financial covenants, which
covenants require Parent and its subsidiaries on a consolidated basis to
maintain specified financial ratios and comply with certain financial tests,
including ratios for maximum leverage as described, minimum interest coverage
(initially upon completion of the offering of the old notes, not less than 1.4
to 1, thereafter increasing periodically until January 1, 2005, at which point
it will remain at 2.5 to 1 until June 2007), minimum debt service coverage (a
static ratio of not less than 1.1 to 1) and minimum fixed charge coverage (a
static ratio of not less than 1.1 to 1). Parent and all of its subsidiaries,
except for Salem Holding, are guarantors of borrowings under the credit
facility. The credit facility is secured by pledges of all of Parent's and its
subsidiaries' assets and all of the capital stock of Parent's subsidiaries.

EXISTING 9 1/2% SENIOR SUBORDINATED NOTES

     In September 1997, Parent issued $150.0 million principal amount of 9 1/2%
senior subordinated notes due 2007. In July 1999, Parent repurchased $50.0
million in principal amount of those notes with a portion of the net proceeds of
Parent's initial public offering. In August, 2000, Salem Holding assumed the
indenture governing our existing 9 1/2% notes in connection with the assignment
of substantially all of Parent's assets and liabilities to Salem Holding,
including the obligations as successor issuer under that
                                        93


indenture. Salem Holding is required to pay $9.5 million per year in interest on
the existing 9 1/2% notes. The indenture for the existing 9 1/2% notes contains
restrictive covenants substantially similar to the restrictive covenants
contained in the indenture for the old notes and the exchange notes offered
hereby. The existing 9 1/2% notes are guaranteed by all of Parent's subsidiaries
other than Salem Holding. The old notes and the exchange notes offered hereby
will be pari passu in right of payment with the existing 9 1/2% notes.

     In the event of a change of control, Salem Holding will be obligated to
offer to repurchase all of the existing 9 1/2% notes at a price of 101% of their
face amount, plus accrued interest. In the event of certain asset sales, Salem
Holding will be obligated to make an offer to purchase the outstanding 9 1/2%
notes on substantially the same terms as the old notes and the exchange notes
offered hereby. See "Description of the Notes -- Limitation on Sale of Assets."

                                        94


                            DESCRIPTION OF THE NOTES

     You can find the definitions of certain terms used in this description
under "-- Certain Definitions." In this description, the term "Salem Holding"
refers only to Salem Communications Holding Corporation and not to any of its
subsidiaries, and the term "Parent" refers only to Salem Communications
Corporation and not to any of its subsidiaries.

     Salem Holding will issue the exchange notes for the old notes under the
indenture that governs the old notes, dated as of June 25, 2001 (the
"Indenture"), among Salem Holding, the Guarantors and The Bank of New York, as
trustee (the "Trustee"). Salem Holding will issue the exchange notes in fully
registered form in denominations of $1,000 and integral multiples thereof. The
Trustee will initially act as paying agent and registrar for the Notes. The
Notes may be presented for registration or transfer and exchange at the offices
of the registrar. Salem Holding may change any paying agent and registrar
without notice to holders of the Notes (the "Holders"). Salem Holding will pay
principal (and premium, if any) on the Notes at the Trustee's corporate office
in New York, New York. At Salem Holding's option, interest may be paid at the
Trustee's corporate trust office or by check mailed to the registered address of
Holders. Any old notes that remain outstanding after the completion of the
Exchange Offer, together with the exchange notes, will be treated as a single
class of securities under the Indenture.

     The following is a summary of the material provisions of the Indenture.
Where reference is made to particular provisions of the Indenture, those
provisions, including the definitions of certain terms, are qualified by
reference to all of the provisions of the Indenture and those terms made a part
of the Indenture by reference to the Trust Indenture Act. We urge you to read
the Indenture because it defines your rights.

     For purposes of this description, references to the "Notes" include the 9%
Senior Subordinated Notes due 2011 of Salem Holding issued on the date of the
Indenture (to the extent not exchanged for the exchange notes), the exchange
notes offered hereby and any additional Notes subsequently issued under the
Indenture.

GENERAL

     Salem Holding issued $150.0 million in aggregate principal amount of old
notes on June 25, 2001. The Notes will mature on July 1, 2011 and will be
unsecured senior subordinated obligations of Salem Holding. Each Note will bear
interest at the rate set forth on the cover page hereof from the issue date or
from the most recent interest payment date to which interest has been paid,
payable semiannually on January 1 and July 1 each year, commencing January 1,
2002, to the person in whose name the Note (or any predecessor Note) is
registered at the close of business on the December 15 or June 15 next preceding
such interest payment date.

     The Notes will be issued initially in an aggregate principal amount of $150
million. Subject to the limitations set forth under "-- Certain
Covenants -- Limitation on Indebtedness," Salem Holding may issue additional
Notes under the Indenture from time to time. The Notes and any additional Notes
subsequently issued under the Indenture would be treated as a single class for
all purposes of the Indenture.

     Payment of the Notes is fully and unconditionally guaranteed by the
Guarantors, jointly and severally, on a senior subordinated basis. Parent and
all of the Subsidiaries of Parent (other than Salem Holding) on the date of the
Indenture comprise the Guarantors. See "-- Guarantees."

     Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable (subject to compliance with
transfer restrictions imposed by applicable securities laws) at the office or
agency of Salem Holding maintained for such purposes (which initially will be
the corporate trust office of the Trustee); provided, however, that payment of
interest may be made at the option of Salem Holding by check mailed to the
person entitled thereto as shown on the security

                                        95


register. The exchange notes will be issued only in fully registered form
without coupons, in denominations of $1,000 and any integral multiple thereof.
No service charge will be made for any registration of transfer, exchange or
redemption of Notes, except in certain circumstances for any tax or other
governmental charge that may be imposed in connection therewith.

OPTIONAL REDEMPTION

     The Notes will be subject to redemption at any time on or after July 1,
2006, at the option of Salem Holding, in whole or in part, on not less than 30
nor more than 60 days' prior notice by first-class mail in amounts of $1,000 or
an integral multiple thereof at the following redemption prices (expressed as
percentages of the principal amount), if redeemed during the 12-month period
beginning July 1 of the years indicated below:



                                                              REDEMPTION
                            YEAR                                PRICE
                            ----                              ----------
                                                           
2006........................................................   104.500%
2007........................................................   103.000%
2008........................................................   101.500%
2009 and thereafter.........................................   100.000%


in each case together with accrued and unpaid interest, if any, to the
redemption date (subject to the right of holders of record on relevant record
dates to receive interest due on an interest payment date).

     In addition, at any time on or prior to July 1, 2004, Salem Holding may
redeem up to 35% of the aggregate principal amount of Notes with the net
proceeds of a Public Equity Offering at a redemption price equal to 109% of the
aggregate principal amount thereof, together with accrued and unpaid interest,
if any, to the redemption date (subject to the right of holders of record on
relevant record dates to receive interest due on an interest payment date);
provided that

     - at least 65% of the aggregate principal amount of Notes issued under the
       Indenture remains outstanding immediately after the occurrence of such
       redemption, and

     - such redemption must occur within 60 days of the date of the closing of
       such Public Equity Offering.

     If less than all of the Notes are to be redeemed, the Trustee shall select
the Notes or portions thereof to be redeemed pro rata, by lot or by any other
method the Trustee shall deem fair and reasonable.

SINKING FUND

     There will be no sinking fund.

SUBORDINATION

     The payment of the principal of, premium, if any, and interest on, the
Notes will be subordinated, as set forth in the Indenture, in right of payment
to the prior payment in full of all Senior Indebtedness in cash or cash
equivalents or in any other form as acceptable to the holders of Senior
Indebtedness. The Notes will be senior subordinated indebtedness of Salem
Holding ranking pari passu with all other existing and future senior
subordinated indebtedness of Salem Holding (including the Existing Notes) and
senior to all existing and future Subordinated Indebtedness of Salem Holding.

     During the continuance of any default in the payment of any Designated
Senior Indebtedness, no payment (other than payments previously made pursuant to
the provisions described under "-- Defeasance or Covenant Defeasance of
Indenture") or distribution of any assets of Salem Holding of any kind or
character (excluding certain permitted equity interests or subordinated
securities) shall be made on

                                        96


account of the principal of, premium, if any, or interest on, the Notes or any
other indenture obligation or on account of the purchase, redemption, defeasance
or other acquisition of, the Notes unless and until such default has been cured,
waived or has ceased to exist or such Designated Senior Indebtedness shall have
been discharged or paid in full in cash or cash equivalents or in any other form
as acceptable to the holders of such Designated Senior Indebtedness.

     During the continuance of any non-payment default with respect to any
Designated Senior Indebtedness pursuant to which the maturity thereof may be
accelerated (a "Non-payment Default") and after the receipt by the Trustee from
a representative of the holder of any Designated Senior Indebtedness of a
written notice of such default, no payment (other than payments previously made
pursuant to the provisions described under "-- Defeasance or Covenant Defeasance
of Indenture") or distribution of any assets of Salem Holding of any kind or
character (excluding certain permitted equity or subordinated securities) may be
made by Salem Holding on account of the principal of, premium, if any, or
interest on, the Notes or any other indenture obligation or on account of the
purchase, redemption, defeasance or other acquisition of, the Notes for the
period specified below (the "Payment Blockage Period").

     The Payment Blockage Period shall commence upon the receipt of notice of
the Non-payment Default by the Trustee from a representative of the holder of
any Designated Senior Indebtedness and shall end on the earliest of

     - the first date on which more than 179 days shall have elapsed since the
       receipt of such written notice (provided such Designated Senior
       Indebtedness as to which notice was given shall not theretofore have been
       accelerated),

     - the date on which such Non-payment Default (and all Non-payment Defaults
       as to which notice is given after such Payment Blockage Period is
       initiated) are cured, waived or ceased to exist or on which such
       Designated Senior Indebtedness is discharged or paid in full in cash or
       cash equivalents or in any other form as acceptable to the holders of
       Designated Senior Indebtedness or

     - the date on which such Payment Blockage Period (and all Non-payment
       Defaults as to which notice is given after such Payment Blockage Period
       is initiated) shall have been terminated by written notice to the Trustee
       from the representatives of holders of Designated Senior Indebtedness
       initiating such Payment Blockage Period,

after which, in the case of any of the three foregoing events, Salem Holding
shall promptly resume making any and all required payments in respect of the
Notes, including any missed payments. In no event will a Payment Blockage Period
extend beyond 179 days from the date of the receipt by the Trustee of the notice
initiating such Payment Blockage Period (such 179-day period referred to as the
"Initial Period").

     Any number of notices of Non-payment Defaults may be given during the
Initial Period; provided that during any 365-day consecutive period only one
Payment Blockage Period during which payment of principal of, or interest on,
the Notes may not be made may commence and the duration of the Payment Blockage
Period may not exceed 179 days.

     No Non-payment Default with respect to Designated Senior Indebtedness which
existed or was continuing on the date of the commencement of any Payment
Blockage Period will be, or can be, made the basis for the commencement of a
second Payment Blockage Period, whether or not within a period of 365
consecutive days, unless such default has been cured or waived for a period of
not less than 90 consecutive days.

     If Salem Holding fails to make any payment on the Notes when due or within
any applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute an Event of Default
under the Indenture and would enable the holders of the Notes to accelerate the
maturity thereof. See "-- Events of Default."

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     The Indenture will provide that in the event of any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relative to Salem
Holding or to its creditors, as such, or its assets, or any liquidation,
dissolution or other winding up of Salem Holding, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy, or any
assignment for the benefit of creditors or any other marshalling of assets or
liabilities of Salem Holding, all Senior Indebtedness must be paid in full in
cash or cash equivalents or in any other manner acceptable to the holders of
Senior Indebtedness, or provision made for such payment, before any payment or
distribution (excluding distributions of certain permitted equity or
subordinated securities) is made on account of the principal of, premium, if
any, or interest on the Notes.

     By reason of such subordination, in the event of liquidation or insolvency,
creditors of Salem Holding who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes, and funds which would be otherwise
payable to the holders of the Notes will be paid to the holders of the Senior
Indebtedness to the extent necessary to pay the Senior Indebtedness in full in
cash or cash equivalents or in any other manner acceptable to the holders of
Senior Indebtedness, and Salem Holding may be unable to meet its obligations
fully with respect to the Notes.

     Each Guarantee of a Guarantor will be an unsecured senior subordinated
obligation of such Guarantor, ranking pari passu in right of payment with all
existing and future senior subordinated indebtedness of such Guarantor
(including any Existing Notes Guarantee of such Guarantor) and senior in right
of payment to all existing and future Subordinated Indebtedness of such
Guarantor. The Indebtedness evidenced by the Guarantees will be subordinated to
Guarantor Senior Indebtedness to the same extent as the Notes are subordinated
to Senior Indebtedness and during any period when payment on the Notes is
blocked by Designated Senior Indebtedness, payment on the Guarantees will be
similarly blocked.

     "Senior Indebtedness" is defined as the principal of, premium, if any, and
interest (including interest accruing after the filing of a petition initiating
any proceeding under any state, federal or foreign bankruptcy law whether or not
allowable as a claim in such proceeding) on any Indebtedness of Salem Holding
(other than as otherwise provided in this definition), whether outstanding on
the date of the Indenture or thereafter created, incurred or assumed, and
whether at any time owing, actually or on a contingent basis, unless, in the
case of any particular Indebtedness, the instrument creating or evidencing the
same or pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes. Without
limiting the generality of the foregoing, "Senior Indebtedness" shall include:

     - the principal of, premium, if any, and interest (including interest
       accruing after the filing of a petition initiating any proceeding under
       any state, federal or foreign bankruptcy law whether or not allowable as
       a claim in such proceeding) and all other obligations of every nature of
       Salem Holding from time to time owed to the lenders (or their agent)
       under the Bank Credit Agreement; provided, however, that any Indebtedness
       under any refinancing, refunding or replacement of the Bank Credit
       Agreement shall not constitute Senior Indebtedness to the extent that the
       Indebtedness thereunder is by its express terms subordinated in right of
       payment to any other Indebtedness of Salem Holding, and

     - Indebtedness under Interest Rate Agreements.

     Notwithstanding the foregoing, "Senior Indebtedness" shall not include

     - Indebtedness evidenced by the Notes or the Existing Notes,

     - Indebtedness that is subordinate or junior in right of payment, by
       contract or otherwise, to any Indebtedness of Salem Holding,

     - Indebtedness which when incurred and without respect to any election
       under Section 1111(b) of Title 11 United States Code, is without recourse
       to Salem Holding,
                                        98


     - Indebtedness which is represented by Disqualified Equity Interests,

     - any liability for foreign, federal, state, local or other taxes owed or
       owing by Salem Holding to the extent such liability constitutes
       Indebtedness,

     - Indebtedness of Salem Holding to a Subsidiary or any other Affiliate of
       Salem Holding or any of such Affiliate's subsidiaries,

     - that portion of any Indebtedness which at the time of issuance is issued
       in violation of the Indenture (but, for purposes of this clause, no such
       Indebtedness shall be deemed to be issued in violation of the Indenture
       if the holders of such obligation or their representative shall have
       received an officers' certificate of Salem Holding to the effect that the
       incurrence of such Indebtedness does not (or, in the case of revolving
       credit indebtedness, that the incurrence of the entire committed amount
       thereof at the date on which the initial borrowing thereunder is made
       would not) violate such provisions of the Indenture),

     - Indebtedness evidenced by a guarantee of any Subordinated Indebtedness or
       Pari Passu Indebtedness and

     - Indebtedness owed by Salem Holding for compensation to employees or for
       services rendered by employees.

     "Guarantor Senior Indebtedness" is defined as the principal of, premium, if
any, and interest (including interest accruing after the filing of a petition
initiating any proceeding under any state, federal or foreign bankruptcy laws
whether or not allowable as a claim in such proceeding) on any Indebtedness of
any Guarantor (other than as otherwise provided in this definition), whether
outstanding on the date of the Indenture or thereafter created, incurred or
assumed, and whether at any time owing, actually or contingent, unless, in the
case of any particular Indebtedness, the instrument creating or evidencing the
same or pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to any Guarantor. Without
limiting the generality of the foregoing, "Guarantor Senior Indebtedness" shall
include:

     - the principal of, premium, if any, and interest (including interest
       accruing after the filing of a petition initiating any proceeding under
       any state, federal or foreign bankruptcy law whether or not allowable as
       a claim in such proceeding) and all other obligations of every nature of
       any Guarantor from time to time owed to the lenders (or their agent)
       under the Bank Credit Agreement; provided, however, that any Indebtedness
       under any refinancing, refunding, or replacement of the Bank Credit
       Agreement shall not constitute Guarantor Senior Indebtedness to the
       extent that the Indebtedness thereunder is by its express terms
       subordinate to any other Indebtedness of any Guarantor and

     - Indebtedness under Interest Rate Agreements.

     Notwithstanding the foregoing, "Guarantor Senior Indebtedness" shall not
include

     - Indebtedness evidenced by the Guarantees or the Existing Notes
       Guarantees,

     - Indebtedness that is subordinate or junior in right of payment, by
       contract or otherwise, to any Indebtedness of any Guarantor,

     - Indebtedness which when incurred and without respect to any election
       under Section 1111(b) of Title 11 United States Code, is without recourse
       to any Guarantor,

     - Indebtedness which is represented by Disqualified Equity Interests,

     - any liability for foreign, federal, state, local or other taxes owed or
       owing by any Guarantor to the extent such liability constitutes
       Indebtedness,

                                        99


     - Indebtedness of any Guarantor to a Subsidiary or any other Affiliate of
       Salem Holding or any of such Affiliate's subsidiaries,

     - that portion of any Indebtedness which at the time of issuance is issued
       in violation of the Indenture (but, for purposes of this clause, no such
       Indebtedness shall be deemed to be issued in violation of the Indenture
       if the holders of such obligation or their representative shall have
       received an officers' certificate of Salem Holding to the effect that the
       incurrence of such Indebtedness does not (or, in the case of revolving
       credit indebtedness, that the incurrence of the entire committed amount
       thereof at the date on which the initial borrowing thereunder is made
       would not) violate such provisions of the Indenture),

     - Indebtedness evidenced by any guarantee of any Subordinated Indebtedness
       or Pari Passu Indebtedness, and

     - Indebtedness owed by any Guarantor for compensation to employees or for
       services rendered by employees.

     "Designated Senior Indebtedness" is defined as

     - all Senior Indebtedness outstanding under the Bank Credit Agreement and

     - any other Senior Indebtedness which is incurred pursuant to an agreement
       (or series of related agreements) simultaneously entered into providing
       for indebtedness, or commitments to lend, of at least $25.0 million at
       the time of determination and is specifically designated in the
       instrument evidencing such Senior Indebtedness or the agreement under
       which such Senior Indebtedness arises as "Designated Senior Indebtedness"
       by Salem Holding.

     As of June 30, 2001, on a pro forma basis, the aggregate amount of Senior
Indebtedness that ranked senior in right of payment to the Notes was $49.6
million, and the aggregate amount of Pari Passu Indebtedness of Salem Holding
was $100.0 million (representing the Existing Notes). Salem Holding's and its
Subsidiaries' ability to incur additional Indebtedness is restricted as set
forth under "-- Certain Covenants -- Limitation on Indebtedness." Any
Indebtedness which can be incurred may constitute additional Senior Indebtedness
or Guarantor Senior Indebtedness. See "Risk Factors -- Your right to receive
payment on the notes and the guarantees is subordinated in right of payment to
all of our and the guarantors' senior debt."

GUARANTEES

     The Guarantors will, jointly and severally, fully and unconditionally
guarantee the due and punctual payment of principal of, premium, if any, and
interest on, the Notes. Such guarantees will be subordinated in right of payment
to Guarantor Senior Indebtedness. See "-- Subordination." As of June 30, 2001,
on a pro forma basis, the aggregate amount of Guarantor Senior Indebtedness that
ranked senior in right of payment to the Guarantees was $49.6 million, all of
which constitutes outstanding indebtedness representing guarantees of Senior
Indebtedness, and the aggregate amount of Pari Passu Indebtedness of the
Guarantors was $100.0 million (representing the Existing Notes Guarantees). In
addition, under certain circumstances, Salem Holding and Parent are required to
cause the execution and delivery of additional Guarantees by their Subsidiaries.
A Guarantor shall be released from all of its obligations under its Guarantee
under certain circumstances. See "-- Certain Covenants -- Limitations on
Issuances of Guarantees of and Pledges for Indebtedness."

     The Guarantors consist of Parent and all of Parent's existing Subsidiaries
(other than Salem Holding) on the date of the Indenture. The obligations of each
Guarantor under its Guarantee will be limited as necessary to prevent such
Guarantee from constituting a fraudulent conveyance under applicable law.

     Parent and the Parent Subsidiary Guarantors will not be subject to any of
the restrictive covenants contained in the Indenture other than those described
under "-- Certain Covenants -- Limitation on
                                       100


Senior Subordinated Indebtedness," "-- Certain Covenants -- Limitations on
Issuances of Guarantees of and Pledges for Indebtedness" and "-- Consolidation,
Merger, Sale of Assets."

CERTAIN COVENANTS

     The Indenture will contain, among others, the following covenants:

     Limitation on Indebtedness. Salem Holding will not, and will not permit any
of its Restricted Subsidiaries to, create, incur, assume or directly or
indirectly guarantee or in any other manner become directly or indirectly liable
for ("incur") any Indebtedness (including Acquired Indebtedness), except that
Salem Holding may incur Indebtedness and a Restricted Subsidiary Guarantor may
incur Permitted Subsidiary Indebtedness if, in each case, the Debt to Operating
Cash Flow Ratio of Salem Holding and its Restricted Subsidiaries at the time of
the incurrence of such Indebtedness, after giving pro forma effect thereto, is
7.0 to 1 or less.

     The foregoing limitation will not apply to the incurrence of any of the
following (collectively, "Permitted Indebtedness"):

          (i) Indebtedness of Salem Holding incurred pursuant to the Bank Credit
     Agreement in an aggregate principal amount which, when taken together with
     the amount of all Indebtedness incurred by Salem Holding pursuant to this
     clause (i) and then outstanding, does not exceed $75.0 million;

          (ii) Indebtedness of Salem Holding pursuant to the Notes (other than
     additional Notes issued pursuant to the Indenture) and Indebtedness of any
     Restricted Subsidiary Guarantor pursuant to a Guarantee;

          (iii) Indebtedness of any Restricted Subsidiary Guarantor consisting
     of a guarantee of Salem Holding's Indebtedness under the Bank Credit
     Agreement;

          (iv) Indebtedness of Salem Holding or any of its Restricted
     Subsidiaries outstanding on the date of the Indenture and listed on
     Schedule I thereto;

          (v) Indebtedness of Salem Holding owing to a Restricted Subsidiary of
     Salem Holding, provided that any Indebtedness of Salem Holding owing to a
     Restricted Subsidiary of Salem Holding that is not a Guarantor is made
     pursuant to an intercompany note in the form attached to the Indenture and
     is subordinated in right of payment from and after such time as the Notes
     shall become due and payable (whether at Stated Maturity, by acceleration
     or otherwise) to the payment and performance of Salem Holding's obligations
     under the Notes; provided further that any disposition, pledge or transfer
     of any such Indebtedness to a Person (other than a disposition, pledge or
     transfer to a Wholly Owned Restricted Subsidiary of Salem Holding or a
     pledge to or for the benefit of the lenders under the Bank Credit
     Agreement) shall be deemed to be an incurrence of such Indebtedness by the
     obligor not permitted by this clause (v);

          (vi) Indebtedness of a Wholly Owned Restricted Subsidiary of Salem
     Holding owing to Salem Holding or another Wholly Owned Restricted
     Subsidiary of Salem Holding; provided that, with respect to Indebtedness
     owing to a Wholly Owned Restricted Subsidiary of Salem Holding that is not
     a Guarantor, (x) any such Indebtedness is made pursuant to an intercompany
     note in the form attached to the Indenture and (y) any such Indebtedness
     shall be subordinated in right of payment from and after such time as the
     obligations under the Guarantee, if any, by such Wholly Owned Restricted
     Subsidiary shall become due and payable to the payment and performance of
     such Wholly Owned Restricted Subsidiary's obligations under its Guarantee;
     provided further that (a) any disposition, pledge or transfer of any such
     Indebtedness to a Person (other than a disposition, pledge or transfer to
     Salem Holding or a Wholly Owned Restricted Subsidiary of Salem Holding or
     pledge to or for the benefit of the lenders under the Bank Credit
     Agreement) shall be deemed to be an incurrence of such Indebtedness by the
     obligor not permitted by this clause (vi) and (b) any

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     transaction pursuant to which any Wholly Owned Restricted Subsidiary of
     Salem Holding, which has Indebtedness owing to Salem Holding or any other
     Wholly Owned Restricted Subsidiary of Salem Holding, ceases to be a Wholly
     Owned Restricted Subsidiary of Salem Holding shall be deemed to be the
     incurrence of Indebtedness by such Wholly Owned Restricted Subsidiary that
     is not permitted by this clause (vi);

          (vii) guarantees of any Restricted Subsidiary made in accordance with
     the provisions of "-- Limitation on Issuances of Guarantees of and Pledges
     for Indebtedness";

          (viii) obligations of Salem Holding entered into in the ordinary
     course of business pursuant to Interest Rate Agreements in respect of
     Indebtedness of Salem Holding as long as such obligations at the time
     incurred do not exceed the aggregate principal amount of such Indebtedness
     then outstanding or in good faith anticipated to be outstanding within 90
     days of such occurrence;

          (ix) any renewals, extensions, substitutions, refundings, refinancings
     or replacements (collectively, a "refinancing") of any Indebtedness
     described in clauses (ii), (iii), (iv) and (v) above, including any
     successive refinancings so long as the aggregate principal amount of
     Indebtedness represented thereby is not increased by such refinancing
     (except, in the case of Guarantees under clause (iii), which Guarantees do
     not exceed the aggregate principal amount of the Bank Credit Agreement)
     plus the lesser of (I) the stated amount of any premium or other payment
     required to be paid in connection with such a refinancing pursuant to the
     terms of the Indebtedness being refinanced or (II) the amount of premium or
     other payment actually paid at such time to refinance the Indebtedness,
     plus, in either case, the amount of expenses of Salem Holding incurred in
     connection with such refinancing and, in the case of Pari Passu
     Indebtedness or Subordinated Indebtedness, such refinancing does not reduce
     the Average Life to Stated Maturity or the Stated Maturity of such
     Indebtedness;

          (x) the guarantee by Salem Holding or any Restricted Subsidiary
     Guarantor of Indebtedness of Salem Holding or a Restricted Subsidiary of
     Salem Holding that was permitted to be incurred pursuant to another
     provision of this covenant; and

          (xi) Indebtedness of Salem Holding in addition to that described in
     clauses (i) through (x) above, and any renewals, extensions, substitutions,
     refinancings, or replacements of such Indebtedness, so long as the
     aggregate principal amount of all such Indebtedness shall not exceed $5.0
     million.

     For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Indebtedness described in clauses (i) through (xi) above
or is entitled to be incurred pursuant to the first paragraph of this covenant,
Salem Holding shall, in its sole discretion, classify (or later reclassify) such
item of Indebtedness in any manner that complies with this covenant. Accrual of
interest, accretion or amortization of original issue discount and the payment
of interest in the form of additional Indebtedness will not be deemed to be an
incurrence of Indebtedness for purposes of this covenant.

     Limitation on Restricted Payments. (a) Salem Holding will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly:

          (i) declare or pay any dividend on, or make any distribution to
     holders of, any of Salem Holding's Equity Interests (other than dividends
     or distributions payable solely in its Qualified Equity Interests);

          (ii) purchase, redeem or otherwise acquire or retire for value,
     directly or indirectly, any Equity Interest of Salem Holding or any
     Affiliate thereof (except Equity Interests held by Salem Holding or any of
     its Wholly Owned Restricted Subsidiaries);

                                       102


          (iii) make any principal payment on, or repurchase, redeem, defease,
     retire or otherwise acquire for value, prior to any scheduled principal
     payment, sinking fund or maturity, any Subordinated Indebtedness of Salem
     Holding or such Restricted Subsidiary;

          (iv) declare or pay any dividend or distribution on any Equity
     Interests of any Subsidiary to any Person (other than Salem Holding or any
     of its Wholly Owned Restricted Subsidiaries);

          (v) incur, create or assume any guarantee of Indebtedness of any
     Affiliate (other than a Wholly Owned Restricted Subsidiary of Salem
     Holding); or

          (vi) make any Investment in any Person (other than any Permitted
     Investments)

(any of the foregoing payments described in clauses (i) through (vi), other than
any such action that is a Permitted Payment, collectively, "Restricted
Payments") unless after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, as determined by the
Board of Directors of Salem Holding, whose determination shall be conclusive and
evidenced by a board resolution):

          (1) no Default or Event of Default shall have occurred and be
     continuing and such Restricted Payment shall not be an event which is, or
     after notice or lapse of time or both, would be, an "event of default"
     under the terms of any Indebtedness of Salem Holding or its Restricted
     Subsidiaries; and

          (2) the aggregate amount of all such Restricted Payments declared or
     made (x) by Parent after the date of the Existing Indenture to but not
     including the Succession Date (references to "Salem Holding" in the
     foregoing clauses (i) through (vi) being deemed to refer to Parent for
     purposes of calculating the amount of such payments declared or made during
     such period by Parent) and (y) by Salem Holding from and including the
     Succession Date, does not exceed the sum of:

             (A) an amount equal to Cumulative Operating Cash Flow less 1.4
        times Cumulative Consolidated Interest Expense and

             (B) the aggregate amount of (x) Parent Equity Sale Proceeds plus
        (y) the aggregate amount of Net Cash Proceeds received by Salem Holding
        after the Succession Date from capital contributions (other than from a
        Subsidiary) or from the issuance or sale (other than to any of its
        Subsidiaries) of its Qualified Equity Interests (except, in each case,
        to the extent such proceeds are used to purchase, redeem or otherwise
        retire Equity Interests or Subordinated Indebtedness as set forth
        below).

     (b) Notwithstanding the foregoing, and in the case of clauses (ii) through
(v) below, so long as there is no Default or Event of Default continuing, the
foregoing provisions shall not prohibit the following actions (clauses (i)
through (v) being referred to as "Permitted Payments"):

          (i) the payment of any dividend within 60 days after the date of
     declaration thereof, if at such date of declaration such payment would be
     permitted by the provisions of the preceding paragraph (a) and such payment
     shall be deemed to have been paid on such date of declaration for purposes
     of the calculation required by the preceding paragraph (a);

          (ii) any transaction with an officer or director of Salem Holding
     entered into in the ordinary course of business (including compensation or
     employee benefit arrangements with any officer or director of Salem
     Holding);

          (iii) the repurchase, redemption, or other acquisition or retirement
     of any Equity Interests of Salem Holding in exchange for (including any
     such exchange pursuant to the exercise of a conversion right or privilege
     pursuant to which cash is paid in lieu of the issuance of fractional shares
     or scrip), or out of the Net Cash Proceeds of, a substantially concurrent
     issuance and sale for cash (other than to a Subsidiary) of other Qualified
     Equity Interests of Salem Holding; provided that the Net Cash

                                       103


     Proceeds from the issuance of such Qualified Equity Interests are excluded
     from clause (2)(B) of the preceding paragraph (a);

          (iv) any repurchase, redemption, defeasance, retirement, refinancing
     or acquisition for value or payment of principal of any Subordinated
     Indebtedness in exchange for, or out of the Net Cash Proceeds of, a
     substantially concurrent issuance and sale for cash (other than to any
     Subsidiary of Salem Holding) of any Qualified Equity Interests of Salem
     Holding; provided that the Net Cash Proceeds from the issuance of such
     shares of Qualified Equity Interests are excluded from clause (2)(B) of the
     preceding paragraph (a); and

          (v) the repurchase, redemption, defeasance, retirement, refinancing or
     acquisition for value or payment of principal of any Subordinated
     Indebtedness (other than Disqualified Equity Interests) (a "refinancing")
     through the issuance of new Subordinated Indebtedness of Salem Holding, as
     the case may be; provided that any such new Indebtedness

             (1) shall be in a principal amount that does not exceed the
        principal amount so refinanced or, if such Subordinated Indebtedness
        provides for an amount less than the principal amount thereof to be due
        and payable upon a declaration or acceleration thereof, then such lesser
        amount as of the date of determination), plus the lesser of (I) the
        stated amount of any premium, interest or other payment required to be
        paid in connection with such a refinancing pursuant to the terms of the
        Indebtedness being refinanced or (II) the amount of premium, interest or
        other payment actually paid at such time to refinance the Indebtedness,
        plus, in either case, the amount of expenses of Salem Holding incurred
        in connection with such refinancing;

             (2) has an Average Life to Stated Maturity greater than the
        remaining Average Life to Stated Maturity of the Notes;

             (3) has a Stated Maturity for its final scheduled principal payment
        later than the Stated Maturity for the final scheduled principal payment
        of the Notes; and

             (4) is expressly subordinated in right of payment to the Notes at
        least to the same extent as the Indebtedness to be refinanced.

     Limitation on Transactions with Affiliates. Salem Holding will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or suffer to exist any transaction or series of related transactions
(including, without limitation, the sale, purchase, exchange or lease of assets,
property or services) with any Affiliate of Salem Holding (other than Salem
Holding or a Wholly Owned Restricted Subsidiary of Salem Holding) unless

     - such transaction or series of transactions is in writing on terms that
       are no less favorable to Salem Holding or such Restricted Subsidiary, as
       the case may be, than would be available in a comparable transaction in
       arm's-length dealings with an unrelated third party and

     - (a) with respect to any transaction or series of transactions involving
       aggregate payments in excess of $1.0 million Salem Holding delivers an
       officers' certificate to the Trustee certifying that such transaction or
       series of related transactions complies with the provisions of the
       immediately preceding bullet item and such transaction or series of
       related transactions has been approved by a majority of the members of
       the Board of Directors of Salem Holding (and approved by a majority of
       Independent Directors or, in the event there is only one Independent
       Director, by such Independent Director) and (b) with respect to any
       transaction or series of transactions involving aggregate payments in
       excess of $5.0 million, an opinion as to the fairness to Salem Holding or
       such Restricted Subsidiary from a financial point of view issued by an
       investment banking firm of national standing.

                                       104


     Notwithstanding the foregoing, this provision will not apply to

     - any transaction with an officer or director of Salem Holding entered into
       in the ordinary course of business (including compensation or employee
       benefit arrangements with any officer or director of Salem Holding),

     - any transaction entered into by Salem Holding or one of its Wholly Owned
       Restricted Subsidiaries with a Wholly Owned Restricted Subsidiary of
       Salem Holding,

     - transactions in existence on the date of the Indenture and any renewal,
       replacement or extension thereof on substantially similar terms, and

     - any Permitted Payment.

     Limitation on Senior Subordinated Indebtedness. Salem Holding and Parent
will not, and will not permit any Restricted Subsidiary Guarantor or any Parent
Subsidiary Guarantor, as the case may be, to, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise in any manner become directly or
indirectly liable for or with respect to or otherwise permit to exist any
Indebtedness that is subordinated in right of payment, by contract or otherwise,
to any Indebtedness of Salem Holding, Parent, or such Guarantor, as the case may
be, unless such Indebtedness is also pari passu with the Notes or the Guarantee
of such Guarantor, or subordinated in right of payment to the Notes or such
Guarantee to at least the same extent as the Notes or such Guarantee are
subordinated in right of payment to Senior Indebtedness or Guarantor Senior
Indebtedness, as the case may be, as set forth in the Indenture.

     Limitation on Liens. Salem Holding will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, affirm or
suffer to exist any Lien of any kind upon any of its property or assets
(including any intercompany notes), now owned or acquired after the date of the
Indenture, or any income or profits therefrom, except if the Notes are directly
secured equally and ratably with (or prior to in the case of Liens with respect
to Subordinated Indebtedness) the obligation or liability secured by such Lien,
excluding, however, from the operation of the foregoing any of the following:

          (a) any Lien existing as of the date of the Indenture;

          (b) any Lien arising by reason of

             (1) any judgment, decree or order of any court, so long as such
        Lien is adequately bonded and any appropriate legal proceedings which
        may have been duly initiated for the review of such judgment, decree or
        order shall not have been finally terminated or the period within which
        such proceedings may be initiated shall not have expired;

             (2) taxes, assessments or other governmental charges not yet
        delinquent or which are being contested in good faith;

             (3) security for payment of workers' compensation or other
        insurance;

             (4) good faith deposits in connection with tenders, leases and
        contracts (other than contracts for the payment of money);

             (5) zoning restrictions, easements, licenses, reservations,
        provisions, covenants, conditions, waivers, restrictions on the use of
        property or minor irregularities of title (and with respect to leasehold
        interests, mortgages, obligations, liens and other encumbrances
        incurred, created, assumed or permitted to exist and arising by, through
        or under a landlord or owner of the leased property, with or without
        consent of the lessee), none of which materially impairs the use of any
        parcel of property material to the operation of the business of Salem
        Holding or any of its Subsidiaries or the value of such property for the
        purpose of such business;

             (6) deposits to secure public or statutory obligations, or in lieu
        of surety or appeal bonds;

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             (7) certain surveys, exceptions, title defects, encumbrances,
        easements, reservations of, or rights of others for, rights of way,
        sewers, electric lines, telegraph or telephone lines and other similar
        purposes or zoning or other restrictions as to the use of real property
        not interfering with the ordinary conduct of the business of Salem
        Holding or any of its Subsidiaries; or

             (8) operation of law in favor of mechanics, materialmen, laborers,
        employees or suppliers, incurred in the ordinary course of business for
        sums which are not yet delinquent or are being contested in good faith
        by negotiations or by appropriate proceedings which suspend the
        collection thereof;

          (c) any Lien now or hereafter existing on property of Salem Holding or
     any of its Restricted Subsidiaries securing Senior Indebtedness or
     Guarantor Senior Indebtedness, in each case which Indebtedness is permitted
     under the provisions of "-- Limitation on Indebtedness" and provided that
     the provisions described under "-- Limitation on Issuances of Guarantees of
     and Pledges for Indebtedness" are complied with;

          (d) any Lien securing Acquired Indebtedness created prior to (and not
     created in connection with, or in contemplation of) the incurrence of such
     Indebtedness by Salem Holding or any of its Subsidiaries, in each case
     which Indebtedness is permitted under the provisions of "-- Limitation on
     Indebtedness"; provided that any such Lien only extends to the assets that
     were subject to such Lien securing such Acquired Indebtedness prior to the
     related transaction by Salem Holding or its Subsidiaries;

          (e) any Lien securing Permitted Subsidiary Indebtedness; and

          (f) any extension, renewal, refinancing or replacement, in whole or in
     part, of any Lien described in the foregoing clauses (a) through (e) so
     long as the amount of security is not increased thereby.

     Limitation on Sale of Assets. Salem Holding will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, consummate an
Asset Sale unless:

     - at least 80% of the consideration from such Asset Sale is received in
       cash, provided that

       -- the amount of liabilities (excluding any contingent liabilities)
          assumed by the transferee or

       -- any notes or other obligations received by Salem Holding or such
          Restricted Subsidiary and converted into cash within 90 days following
          the receipt thereof shall be deemed to be "cash," and

     - Salem Holding or such Restricted Subsidiary receives consideration at the
       time of such Asset Sale at least equal to the Fair Market Value of the
       shares or assets sold (other than in the case of an involuntary Asset
       Sale, as determined by the Board of Directors of Salem Holding and
       evidenced in a board resolution).

     If all or a portion of the Net Cash Proceeds of any Asset Sale are not
required to be applied to repay permanently any Senior Indebtedness then
outstanding as required by the terms thereof, or Salem Holding determines not to
apply such Net Cash Proceeds to the permanent prepayment of such Senior
Indebtedness or if no such Senior Indebtedness is then outstanding, then Salem
Holding may, within 12 months of the Asset Sale, invest the Net Cash Proceeds in
properties and assets that (as determined by the Board of Directors) replace the
properties and assets that were the subject of the Asset Sale or in properties
and assets that will be used in the businesses of Salem Holding or its
Restricted Subsidiaries existing on the date of the Indenture or reasonably
related thereto. The amount of such Net Cash Proceeds neither used to
permanently repay or prepay Senior Indebtedness nor used or invested as set
forth in this paragraph constitutes "Excess Proceeds."

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     When the aggregate amount of Excess Proceeds equals $5.0 million or more,
Salem Holding shall apply the Excess Proceeds to the repayment of the Notes and
any Pari Passu Indebtedness required to be repurchased under the instrument
governing such Pari Passu Indebtedness as follows:

     - Salem Holding shall make an offer to purchase (an "Offer") from all
       holders of the Notes in accordance with the procedures set forth in the
       Indenture in the maximum principal amount (expressed as a multiple of
       $1,000) of Notes that may be purchased out of an amount (the "Note
       Amount") equal to the product of such Excess Proceeds (less any amounts
       used to pay reasonable fees and expenses connected with such Offer and
       any Pari Passu Offer) multiplied by a fraction, the numerator of which is
       the outstanding principal amount of the Notes, and the denominator of
       which is the sum of the outstanding principal amount of the Notes and
       such Pari Passu Indebtedness (subject to proration in the event such
       amount is less than the aggregate Offered Price of all Notes tendered)
       and

     - to the extent required by such Pari Passu Indebtedness to permanently
       reduce the principal amount of such Pari Passu Indebtedness, Salem
       Holding shall make an offer to purchase or otherwise repurchase or redeem
       Pari Passu Indebtedness (a "Pari Passu Offer") in an amount (the "Pari
       Passu Debt Amount") equal to the excess of the Excess Proceeds (less any
       amounts used to pay reasonable fees and expenses connected with such
       Offer and any Pari Passu Offer) over the Note Amount, provided that in no
       event shall the Pari Passu Debt Amount exceed the principal amount of
       such Pari Passu Indebtedness plus the amount of any premium required to
       be paid to repurchase such Pari Passu Indebtedness.

The offer price shall be payable in cash in an amount equal to 100% of the
principal amount of the Notes plus accrued and unpaid interest, if any, to the
date (the "Offer Date") such Offer is consummated (the "Offered Price"), in
accordance with the procedures set forth in the Indenture.

     To the extent that the aggregate Offered Price of the Notes tendered
pursuant to the Offer is less than the Note Amount relating thereto or the
aggregate amount of Pari Passu Indebtedness that is purchased is less than the
Pari Passu Debt Amount (the amount of such shortfall, if any, constituting a
"Deficiency"), Salem Holding shall use such Deficiency in the business of Salem
Holding and its Restricted Subsidiaries. Upon completion of the purchase of all
the Notes tendered pursuant to an Offer and repurchase of the Pari Passu
Indebtedness pursuant to a Pari Passu Offer, the amount of Excess Proceeds, if
any, shall be reset at zero.

     Pending the final application of any Net Cash Proceeds, Salem Holding may
temporarily reduce revolving credit borrowings or otherwise invest such Net Cash
Proceeds in any manner that is not prohibited by the Indenture.

     If Salem Holding becomes obligated to make an Offer as described above, the
Notes shall be purchased by Salem Holding, at the option of the holder thereof,
in whole or in part, in integral multiples of $1,000, on a date that is not
earlier than 45 days and not later than 60 days from the date the notice is
given to holders, subject to proration in the event the Note Amount is less than
the aggregate Offered Price of all Notes tendered.

     Salem Holding shall comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, and any other applicable securities
laws or regulations in connection with an Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
the covenant described hereunder, Salem Holding shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the covenant described hereunder by virtue thereof.

     Salem Holding will not, and will not permit any of its Restricted
Subsidiaries to, create or permit to exist or become effective any restriction
(other than restrictions existing under (i) Indebtedness as in effect on the
date of the Indenture listed on a schedule thereto as such Indebtedness may be
refinanced

                                       107


from time to time, provided that such restrictions are no less favorable to the
holders of the Notes than those existing on the date of the Indenture or (ii)
any Senior Indebtedness and any Guarantor Senior Indebtedness) that would
materially impair the ability of Salem Holding to make an Offer to purchase the
Notes or, if such Offer is made, to pay for the Notes tendered for purchase.

     Limitation on Asset Swaps. Salem Holding will not, and will not permit any
of its Restricted Subsidiaries to, engage in Asset Swaps, unless:

     - at the time of entering into such Asset Swap, and immediately after
       giving effect to such Asset Swap, no Default or Event of Default shall
       have occurred and be continuing or would occur as a consequence thereof;
       and

     - Salem Holding or such Restricted Subsidiary receives consideration at the
       time of such Asset Swap at least equal to the Fair Market Value of the
       properties or assets exchanged as determined in writing by a nationally
       recognized investment banking or appraisal firm.

     Limitation on Issuances of Guarantees of and Pledges for Indebtedness. (a)
Salem Holding will not permit any of its Restricted Subsidiaries, other than the
Restricted Subsidiary Guarantors, directly or indirectly, to secure the payment
of any Senior Indebtedness of Salem Holding and will not, and will not permit
any of its Restricted Subsidiaries to, pledge any intercompany notes
representing obligations of any of its Restricted Subsidiaries (other than the
Restricted Subsidiary Guarantors) to secure the payment of any Senior
Indebtedness unless in each case such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture to the Indenture providing for a
guarantee of payment of the Notes by such Restricted Subsidiary, which guarantee
shall be on the same terms as the guarantee of the Senior Indebtedness (if a
guarantee of Senior Indebtedness is granted by such Restricted Subsidiary)
except that the guarantee of the Notes need not be secured and shall be
subordinated to the claims against such Restricted Subsidiary in respect of
Senior Indebtedness to the same extent as the Notes are subordinated to Senior
Indebtedness of Salem Holding under the Indenture.

     (b) Salem Holding will not permit any of its Restricted Subsidiaries, other
than the Restricted Subsidiary Guarantors, directly or indirectly, to guarantee,
assume or in any other manner become liable with respect to any Indebtedness of
Salem Holding (other than guarantees in existence on the date of the Indenture)
unless such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to the Indenture providing for a guarantee of the Notes
on the same terms as the guarantee of such Indebtedness, except that, if the
Notes are subordinated in right of payment to such Indebtedness, the guarantee
under the supplemental indenture shall be subordinated to the guarantee of such
Indebtedness to the same extent as the Notes are subordinated to such
Indebtedness under the Indenture.

     (c) Parent will not, and will not permit any of its Subsidiaries (other
than Salem Holding and Salem Holding's Restricted Subsidiaries, which shall be
subject to the foregoing clauses (a) and (b)), other than the Parent Subsidiary
Guarantors, directly or indirectly, to guarantee, assume or in any other manner
become liable with respect to any Indebtedness of Salem Holding (other than
guarantees in existence on the date of the Indenture) unless Parent or such
Subsidiary, as the case may be, simultaneously executes and delivers a
supplemental indenture to the Indenture providing for a guarantee of the Notes
on the same terms as the guarantee of such Indebtedness, except that if the
Notes are subordinated in right of payment to such Indebtedness, the guarantee
under the supplemental indenture shall be subordinated to the guarantee of such
Indebtedness to the same extent as the Notes are subordinated to such
Indebtedness under the Indenture.

     (d) Any Guarantee by any Restricted Subsidiary of Salem Holding or by any
Parent Subsidiary Guarantor shall provide by its terms that it shall be
automatically and unconditionally released and discharged upon:

          (i) any sale, exchange or transfer to any Person not an Affiliate of
     Parent, of all of Salem Holding's or Parent's direct or indirect Equity
     Interest in, or all or substantially all the assets of, such

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     Restricted Subsidiary or such Parent Subsidiary Guarantor, as the case may
     be, which is in compliance with the Indenture or

          (ii) the release by the holders of the Indebtedness of Salem Holding
     described in clauses (a), (b) and (c) above of their security interest or
     their guarantee by such Restricted Subsidiary of Salem Holding or by such
     Parent Subsidiary Guarantor, as the case may be, including any deemed
     release upon payment in full of all obligations under such Indebtedness, at
     a time when (A) no other Indebtedness of Salem Holding has been secured or
     guaranteed by such Restricted Subsidiary of Salem Holding or such Parent
     Subsidiary Guarantor, as the case may be, or (B) the holders of all such
     other Indebtedness which is secured or guaranteed by such Restricted
     Subsidiary of Salem Holding or such Parent Subsidiary Guarantor, as the
     case may be, also release their security interest in, or guarantee by, such
     Restricted Subsidiary of Salem Holding or such Parent Subsidiary Guarantor,
     as the case may be (including any deemed release upon payment in full of
     all obligations under such Indebtedness.

     Restriction on Transfer of Assets. Salem Holding and the Restricted
Subsidiary Guarantors will not sell, convey, transfer or otherwise dispose of
their respective assets or property to any of Salem Holding's Restricted
Subsidiaries (other than any Restricted Subsidiary Guarantor), except for sales,
conveyances, transfers or other dispositions made in the ordinary course of
business. For purposes of this provision, any sale, conveyance, transfer, lease
or other disposition of property or assets, having a Fair Market Value in excess
of:

     - $1.0 million for any sale, conveyance, transfer, leases or dispositions
       or series of related sales, conveyances, transfers, leases and
       dispositions and

     - $5.0 million in the aggregate for all such sales, conveyances, transfers,
       leases or dispositions in any fiscal year of Salem Holding

shall not be considered "in the ordinary course of business"; provided that
sales by Salem Holding of block program time and spot advertising time shall not
be deemed not to be "in the ordinary course of business" solely because of the
dollar volume of such sales.

     Purchase of Notes Upon a Change of Control. If a Change of Control shall
occur at any time, then each holder of Notes shall have the right to require
that Salem Holding purchase such holder's Notes in whole or in part in integral
multiples of $1,000, at a purchase price (the "Change of Control Purchase
Price") in cash in an amount equal to 101% of the principal amount of such
Notes, plus accrued and unpaid interest, if any, to the date of purchase (the
"Change of Control Purchase Date"), pursuant to the offer described below (the
"Change of Control Offer") and the other procedures set forth in the Indenture.

     Within 30 days following any Change of Control, Salem Holding shall notify
the Trustee thereof and give written notice of such Change of Control to each
holder of Notes, by first-class mail, postage prepaid, at his address appearing
in the security register, stating, among other things, the purchase price and
that the purchase date shall be a business day no earlier than 30 days nor later
than 60 days from the date such notice is mailed, or such later date as is
necessary to comply with requirements under the Exchange Act; that any Note not
tendered will continue to accrue interest; that, unless Salem Holding defaults
in the payment of the purchase price, any Notes accepted for payment pursuant to
the Change of Control Offer shall cease to accrue interest after the Change of
Control Purchase Date; and certain other procedures that a holder of Notes must
follow to accept a Change of Control Offer or to withdraw such acceptance.

     If a Change of Control Offer is made, there can be no assurance that Salem
Holding will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes that might be delivered by holders of the
Notes seeking to accept the Change of Control Offer. A Change of Control will
also result in an event of default under the Bank Credit Agreement and could
result in the

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acceleration of all indebtedness under the Bank Credit Agreement. See
"Description of Existing Indebtedness -- Credit Facility." A Change of Control
will also require Salem Holding to offer to repurchase the Existing Notes
pursuant to the Existing Indenture. The failure of Salem Holding to make or
consummate the Change of Control Offer or pay the Change of Control Purchase
Price when due will result in an Event of Default under the Indenture which
could, in turn, constitute a default under other Indebtedness. In such
circumstances, the subordination provisions in the Indenture would likely
restrict payments to the holders of the Notes.

     The term "all or substantially all" as used in the definition of "Change of
Control" has not been interpreted under New York law (which is the governing law
of the Indenture) to represent a specific quantitative test. As a consequence,
in the event the holders of the Notes elected to exercise their rights under the
Indenture and Salem Holding elected to contest such election, there could be no
assurance as to how a court interpreting New York law would interpret the
phrase.

     The existence of a holder's right to require Salem Holding to repurchase
such holder's Notes upon a Change of Control may deter a third party from
acquiring Salem Holding in a transaction which constitutes a Change of Control.

     "Change of Control" means the occurrence of any of the following events:

     - any "person" or "group" (as such terms are used in Sections 13(d) and
       14(d) of the Exchange Act), other than Permitted Holders, is or becomes
       the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
       Exchange Act, except that a Person shall be deemed to have beneficial
       ownership of all shares that such Person has the right to acquire,
       whether such right is exercisable immediately or only after the passage
       of time), directly or indirectly, of more than 40% of the total
       outstanding Voting Stock of Salem Holding or Parent, provided that the
       Permitted Holders "beneficially own" (as so defined) a lesser percentage
       of such Voting Stock than such other Person and do not have the right or
       ability by voting power, contract or otherwise to elect or designate for
       election a majority of the board of directors of Salem Holding or Parent,
       as the case may be;

     - during any period of two consecutive years, individuals who at the
       beginning of such period constituted the board of directors of Salem
       Holding or Parent (together with any new directors whose election to such
       board of directors or whose nomination for election by the shareholders
       of Salem Holding or Parent, as the case may be, was approved by a vote of
       66% of the directors then still in office who were either directors at
       the beginning of such period or whose election or nomination for election
       was previously so approved) cease for any reason to constitute a majority
       of such board of directors then in office;

     - Salem Holding or Parent consolidates with or merges with or into any
       Person or conveys, transfers or leases all or substantially all of its
       assets to any Person, or any corporation consolidates with or merges into
       or with Salem Holding or Parent, in any such event pursuant to a
       transaction in which the outstanding Voting Stock of Salem Holding or
       Parent, as the case may be, is changed into or exchanged for cash,
       securities or other property, other than any such transaction in which
       the outstanding Voting Stock of Salem Holding or Parent, as the case may
       be, is not changed or exchanged at all (except to the extent necessary to
       reflect a change in the jurisdiction of incorporation of Salem Holding or
       Parent, as the case may be) or in which (A) the outstanding Voting Stock
       of Salem Holding or Parent, as the case may be, is changed into or
       exchanged for (x) Voting Stock of the surviving corporation which is not
       Disqualified Equity Interests or (y) cash, securities and other property
       (other than Equity Interests of the surviving corporation) in an amount
       which could be paid by Salem Holding as a Restricted Payment in
       accordance with the provisions described under "-- Limitation on
       Restricted Payments" (and such amount shall be treated as a Restricted
       Payment subject to the provisions described under "-- Limitation on
       Restricted Payments") and (B) no "person" or "group" other than Permitted
       Holders owns immediately after such transaction directly or indirectly,
       more than the greater of (1) 40% of the
                                       110


       total outstanding Voting Stock of the surviving corporation and (2) the
       percentage of the outstanding Voting Stock of the surviving corporation
       owned, directly or indirectly, by Permitted Holders immediately after
       such transaction; or

     - Salem Holding or Parent is liquidated or dissolved or adopts a plan of
       liquidation or dissolution other than (in the case of Salem Holding) in a
       transaction which complies with the provisions described under
       "-- Consolidation, Merger, Sale of Assets."

     "Permitted Holders" means as of the date of determination

          (i) any of Stuart W. Epperson and Edward G. Atsinger III;

          (ii) family members or the relatives of the Persons described in
     clause (i);

          (iii) any trusts created for the benefit of the Persons described in
     clauses (i), (ii) or (iv) or any trust for the benefit of any such trust;
     or

          (iv) in the event of the incompetence or death of any of the Persons
     described in clauses (i) and (ii), such Person's estate, executor,
     administrator, committee or other personal representative or beneficiaries,
     in each case who at any particular date shall beneficially own or have the
     right to acquire, directly or indirectly, Equity Interests of Salem
     Holding.

     Salem Holding will comply with the applicable tender offer rules, including
Rule 14e-1 under the Exchange Act, and any other applicable securities laws or
regulations in connection with a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
the covenant described hereunder, Salem Holding shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the covenant described hereunder by virtue thereof.

     Salem Holding will not, and will not permit any of its Restricted
Subsidiaries to, create or permit to exist or become effective any restriction
(other than restrictions existing under Indebtedness as in effect on the date of
the Indenture) that would materially impair the ability of Salem Holding to make
a Change of Control Offer to purchase the Notes or, if such Change of Control
Offer is made, to pay for the Notes tendered for purchase.

     Limitation on Subsidiary Equity Interests. Salem Holding will not permit
any of its Restricted Subsidiaries to issue any Equity Interests, except for:

     - Equity Interests issued to and held by Salem Holding or a Wholly Owned
       Restricted Subsidiary of Salem Holding, and

     - Equity Interests issued by a Person prior to the time (A) such Person
       becomes a Restricted Subsidiary of Salem Holding, (B) such Person merges
       with or into a Restricted Subsidiary of Salem Holding or (C) a Restricted
       Subsidiary of Salem Holding merges with or into such Person; provided
       that such Equity Interests were not issued or incurred by such Person in
       anticipation of the type of transaction contemplated by subclause (A),
       (B) or (C).

     Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries. Salem Holding will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary of Salem Holding to (i) pay dividends or make any other
distribution on its Equity Interests, (ii) pay any Indebtedness owed to Salem
Holding or a Restricted Subsidiary of Salem Holding, (iii) make any Investment
in Salem Holding or a Restricted Subsidiary of Salem Holding or (iv) transfer
any of its properties or assets to Salem Holding or any Restricted Subsidiary of
Salem Holding; except

          (a) any encumbrance or restriction pursuant to an agreement in effect
     on the date of the Indenture;

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          (b) any encumbrance or restriction, with respect to a Restricted
     Subsidiary of Salem Holding that is not a Subsidiary of Salem Holding on
     the date of the Indenture, in existence at the time such Person becomes a
     Restricted Subsidiary of Salem Holding and not incurred in connection with,
     or in contemplation of, such Person becoming a Restricted Subsidiary;

          (c) any encumbrance or restriction existing under any agreement that
     extends, renews, refinances or replaces the agreements containing the
     encumbrances or restrictions in the foregoing clauses (a) and (b), or in
     this clause (c), provided that the terms and conditions of any such
     encumbrances or restrictions are not materially less favorable to the
     holders of the Notes than those under or pursuant to the agreement
     evidencing the Indebtedness so extended, renewed, refinanced or replaced or
     are not more restrictive than those set forth in the Indenture;

          (d) any encumbrance or restriction created pursuant to an asset sale
     agreement, stock sale agreement or similar instrument pursuant to which an
     Asset Sale permitted under "-- Limitations on Sale of Assets" is to be
     consummated, so long as such restriction or encumbrance shall be effective
     only for a period from the execution and delivery of such agreement or
     instrument through a termination date not later than 270 days after such
     execution and delivery;

          (e) any such encumbrance or restriction consisting of customary
     contractual non-assignment provisions in a contract entered into in the
     ordinary course of business, to the extent such provisions restrict the
     transfer of rights, duties or obligations under such contract;

          (f) in the case of clause (iv) above, restrictions contained in
     security agreements or mortgages securing Indebtedness of a Restricted
     Subsidiary permitted to be incurred pursuant to the covenant "Limitation on
     Indebtedness" to the extent such restrictions restrict the transfer of the
     property subject to such security agreements or mortgages; and

          (g) any restriction imposed by applicable law.

     Limitation on Unrestricted Subsidiaries. Salem Holding will not make, and
will not permit any of its Restricted Subsidiaries to make, any Investments in
Unrestricted Subsidiaries if, at the time thereof, the aggregate amount of such
Investments would exceed the amount of Restricted Payments then permitted to be
made pursuant to the "Limitation on Restricted Payments" covenant. Any
Investments in Unrestricted Subsidiaries permitted to be made pursuant to this
covenant:

     - will be treated as the payment of a Restricted Payment in calculating the
       amount of Restricted Payments made by Salem Holding and

     - may be made in cash or property.

     Provision of Financial Statements. The Indenture will provide that, whether
or not Salem Holding is subject to Section 13(a) or 15(d) of the Exchange Act,
Salem Holding will, to the extent permitted under the Exchange Act, file with
the Commission the annual reports, quarterly reports and other documents which
Salem Holding would have been required to file with the Commission pursuant to
such Section 13(a) or 15(d) if Salem Holding were so subject, such documents to
be filed with the Commission on or prior to the respective dates (the "Required
Filing Dates") by which Salem Holding would have been required so to file such
documents if Salem Holding were so subject. Salem Holding will be deemed to have
satisfied such requirements if Parent files and provides reports, documents and
information of the types otherwise so required within the applicable time
periods and Salem Holding is not required to file such reports, documents and
information separately under the applicable rules and regulations of the
Commission (after giving effect to any exemptive relief) because of the filings
by Parent as long as Parent's quarterly and annual reports contain separate
audited consolidated financial statements for Salem Holding and its Subsidiaries
or consolidating financial information which includes separate condensed
consolidated financial information of Salem Holding and its Subsidiaries.

                                       112


     Salem Holding will also in any event:

     - within 15 days of each Required Filing Date (i) transmit by mail to all
       holders, as their names and addresses appear in the Note register,
       without cost to such holders and (ii) file with the Trustee copies of the
       annual reports, quarterly reports, information and other documents which
       Salem Holding would have been required to file with the Commission
       pursuant to Section 13(a) or 15(d) of the Exchange Act if Salem Holding
       were subject to such Sections (unless such documents are filed by Parent
       as provided above and such documents are then so mailed to the holders
       and filed with the Trustee), and

     - if filing such documents by Salem Holding (or Parent, as the case may be)
       with the Commission is not permitted under the Exchange Act, promptly
       upon written request and payment of the reasonable cost of duplication
       and delivery, supply copies of such documents to any prospective holder
       at Salem Holding's cost.

     Additional Covenants. The Indenture will also contain covenants with
respect to the following matters:

     - payment of principal, premium and interest;

     - maintenance of an office or agency;

     - arrangements regarding the handling of money held in trust;

     - maintenance of corporate existence;

     - payment of taxes and other claims;

     - maintenance of properties; and

     - maintenance of insurance.

CONSOLIDATION, MERGER, SALE OF ASSETS

     Salem Holding shall not, in a single transaction or a series of related
transactions, consolidate with or merge with or into any other Person or sell
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of its properties and assets to any Person or group of affiliated Persons, or
permit any of its Subsidiaries to enter into any such transaction or
transactions if such transaction or transactions, in the aggregate, would result
in a sale, assignment, conveyance, transfer, lease or disposition of all or
substantially all of the properties and assets of Salem Holding and its
Subsidiaries on a Consolidated basis to any other Person or group of affiliated
Persons, unless at the time and after giving effect thereto:

     - either (1) Salem Holding shall be the continuing corporation or (2) the
       Person (if other than Salem Holding) formed by such consolidation or into
       which Salem Holding is merged or the Person which acquires by sale,
       assignment, conveyance, transfer, lease or disposition of all or
       substantially all of the properties and assets of Salem Holding and its
       Subsidiaries on a Consolidated basis (the "Surviving Entity") shall be a
       corporation duly organized and validly existing under the laws of the
       United States of America, any state thereof or the District of Columbia
       and such Person assumes, by a supplemental indenture in a form reasonably
       satisfactory to the Trustee, all the obligations of Salem Holding under
       the Notes and the Indenture, and the Indenture shall remain in full force
       and effect;

     - immediately before and immediately after giving effect to such
       transaction, no Default or Event of Default shall have occurred and be
       continuing;

     - immediately after giving effect to such transaction on a pro forma basis,
       the Consolidated Net Worth of Salem Holding (or the Surviving Entity if
       Salem Holding is not the continuing obligor

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       under the Indenture) is equal to or greater than the Consolidated Net
       Worth of Salem Holding immediately prior to such transaction;

     - immediately before and immediately after giving effect to such
       transaction on a pro forma basis (on the assumption that the transaction
       occurred on the first day of the four-quarter period immediately prior to
       the consummation of such transaction with the appropriate adjustments
       with respect to the transaction being included in such pro forma
       calculation), Salem Holding (or the Surviving Entity if Salem Holding is
       not the continuing obligor under the Indenture) could incur $1.00 of
       additional Indebtedness under the first paragraph of "-- Certain
       Covenants -- Limitation on Indebtedness";

     - each Guarantor, if any, unless it is the other party to the transactions
       described above, shall have by supplemental indenture confirmed that its
       Guarantee shall apply to such Person's obligations under the Indenture
       and the Notes;

     - if any of the property or assets of Salem Holding or any of its
       Subsidiaries would thereupon become subject to any Lien, the provisions
       of "-- Certain Covenants -- Limitation on Liens" are complied with; and

     - Salem Holding or the Surviving Entity shall have delivered, or caused to
       be delivered, to the Trustee, in form and substance reasonably
       satisfactory to the Trustee, an officers' certificate and an opinion of
       counsel, each to the effect that such consolidation, merger, transfer,
       sale, assignment, lease or other transaction and the supplemental
       indenture in respect thereto comply with the provisions of the Indenture
       and that all conditions precedent provided for in the Indenture relating
       to such transaction have been complied with.

     Each Guarantor (including Parent) will not, and Salem Holding and Parent
will not permit a Restricted Subsidiary Guarantor or a Parent Subsidiary
Guarantor, as the case may be, to, in a single transaction or series of related
transactions merge or consolidate with or into any other corporation (other than
Salem Holding or any other Guarantor) or other entity, or sell, assign, convey,
transfer, lease or otherwise dispose of all or substantially all of its
properties and assets on a Consolidated basis to any entity (other than Salem
Holding or any other Guarantor) unless at the time and after giving effect
thereto:

     - either (1) such Guarantor shall be the continuing corporation or (2) the
       entity (if other than such Guarantor) formed by such consolidation or
       into which such Guarantor is merged or the entity which acquires by sale,
       assignment, conveyance, transfer, lease or disposition the properties and
       assets of such Guarantor shall be a corporation duly organized and
       validly existing under the laws of the United States, any state thereof
       or the District of Columbia and shall expressly assume by a supplemental
       indenture, executed and delivered to the Trustee, in a form reasonably
       satisfactory to the Trustee, all the obligations of such Guarantor under
       its Guarantee and the Indenture;

     - immediately before and immediately after giving effect to such
       transaction, no Default or Event of Default shall have occurred and be
       continuing, and

     - such Guarantor shall have delivered to the Trustee, in form and substance
       reasonably satisfactory to the Trustee, an officers' certificate and an
       opinion of counsel, each stating that such consolidation, merger, sale,
       assignment, conveyance, transfer, lease or disposition and such
       supplemental indenture comply with the Indenture, and thereafter all
       obligations of the predecessor shall terminate. The provisions of this
       paragraph shall not apply to any transaction (including an Asset Sale
       made in accordance with "-- Certain Covenants -- Limitations on Sale of
       Assets") with respect to any Guarantor if the Guarantee of such Guarantor
       is released in connection with such transaction in accordance with
       paragraph (d) of "-- Certain Covenants -- Limitations on Issuances of
       Guarantees of and Pledges for Indebtedness."

     In the event of any transaction described in and complying with the
conditions listed in the immediately preceding paragraphs in which Salem Holding
or any Guarantor is not the continuing corporation, the successor Person formed
or remaining shall succeed to, and be substituted for, and may
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exercise every right and power of, Salem Holding or such Guarantor, as the case
may be, and Salem Holding or such Guarantor, as the case may be, would be
discharged from its obligations under the Indenture, the Notes or its Guarantee,
as the case may be.

EVENTS OF DEFAULT

     An Event of Default will occur under the Indenture if:

          (i) there shall be a default in the payment of any interest on any
     Note (including any Additional Interest) when it becomes due and payable,
     and such default shall continue for a period of 30 days;

          (ii) there shall be a default in the payment of the principal of (or
     premium, if any, on) any Note at its Maturity (upon acceleration, optional
     or mandatory redemption, required repurchase or otherwise);

          (iii) (a) there shall be a default in the performance, or breach, of
     any covenant or agreement of Salem Holding or Parent or any other Guarantor
     under the Indenture (other than a default in the performance, or breach, of
     a covenant or agreement which is specifically dealt with in clause (i) or
     (ii) or in clause (b), (c) or (d) of this clause (iii)) and such default or
     breach shall continue for a period of 30 days after written notice has been
     given, by certified mail, (x) to Salem Holding by the Trustee or (y) to
     Salem Holding and the Trustee by the holders of at least 25% in aggregate
     principal amount of the outstanding Notes; (b) there shall be a default in
     the performance or breach of the provisions described in "-- Consolidation,
     Merger, Sale of Assets"; (c) Salem Holding shall have failed to make or
     consummate an Offer in accordance with the provisions of "-- Certain
     Covenants -- Limitation on Sale of Assets"; or (d) Salem Holding shall have
     failed to make or consummate a Change of Control Offer in accordance with
     the provisions of "-- Certain Covenants -- Purchase of Notes Upon a Change
     of Control";

          (iv) one or more defaults shall have occurred under any agreements,
     indentures or instruments under which Salem Holding, any Guarantor or any
     Restricted Subsidiary of Salem Holding then has outstanding Indebtedness in
     excess of $5.0 million in the aggregate and, if not already matured at its
     final maturity in accordance with its terms, such Indebtedness shall have
     been accelerated;

          (v) any Guarantee shall for any reason cease to be, or be asserted in
     writing by any Guarantor or Salem Holding not to be, in full force and
     effect, enforceable in accordance with its terms, except to the extent
     contemplated by the Indenture and any such Guarantee;

          (vi) one or more judgments, orders or decrees for the payment of money
     in excess of $5.0 million, either individually or in the aggregate (net of
     amounts covered by insurance, bond, surety or similar instrument) shall be
     entered against Salem Holding, any Guarantor or any Restricted Subsidiary
     of Salem Holding or any of their respective properties and shall not be
     discharged and either (a) any creditor shall have commenced an enforcement
     proceeding upon such judgment, order or decree or (b) there shall have been
     a period of 60 consecutive days during which a stay of enforcement of such
     judgment or order, by reason of an appeal or otherwise, shall not be in
     effect;

          (vii) any holder or holders of at least $5.0 million in aggregate
     principal amount of Indebtedness of Salem Holding, any Guarantor or any
     Restricted Subsidiary of Salem Holding after a default under such
     Indebtedness shall notify the Trustee of the intended sale or disposition
     of any assets of Salem Holding, any Guarantor or any Restricted Subsidiary
     of Salem Holding that have been pledged to or for the benefit of such
     holder or holders to secure such Indebtedness or shall commence
     proceedings, or take any action (including by way of set-off), to retain in
     satisfaction of such Indebtedness or to collect on, seize, dispose of or
     apply in satisfaction of Indebtedness, assets of Salem Holding or any
     Restricted Subsidiary of Salem Holding (including funds on deposit or held
     pursuant to lock-box and other similar arrangements);

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          (viii) there shall have been the entry by a court of competent
     jurisdiction of (a) a decree or order for relief in respect of Salem
     Holding, any Guarantor or any Restricted Subsidiary of Salem Holding in an
     involuntary case or proceeding under any applicable Bankruptcy Law or (b) a
     decree or order adjudging Salem Holding, any Guarantor or any Restricted
     Subsidiary of Salem Holding bankrupt or insolvent, or seeking
     reorganization, arrangement, adjustment or composition of or in respect of
     Salem Holding, any Guarantor or any Restricted Subsidiary of Salem Holding
     under any applicable federal or state law, or appointing a custodian,
     receiver, liquidator, assignee, trustee, sequestrator (or other similar
     official) of Salem Holding, any Guarantor or any Restricted Subsidiary of
     Salem Holding or of any substantial part of their respective properties, or
     ordering the winding up or liquidation of their affairs, and any such
     decree or order for relief shall continue to be in effect, or any such
     other decree or order shall be unstayed and in effect, for a period of 60
     consecutive days; or

          (ix) (a) Salem Holding, any Guarantor or any Restricted Subsidiary of
     Salem Holding commences a voluntary case or proceeding under any applicable
     Bankruptcy Law or any other case or proceeding to be adjudicated bankrupt
     or insolvent,

          (b) Salem Holding, any Guarantor or any Restricted Subsidiary of Salem
     Holding consents to the entry of a decree or order for relief in respect of
     Salem Holding, any Guarantor or such Restricted Subsidiary in an
     involuntary case or proceeding under any applicable Bankruptcy Law or to
     the commencement of any bankruptcy or insolvency case or proceeding against
     it,

          (c) Salem Holding, any Guarantor or any Restricted Subsidiary of Salem
     Holding files a petition or answer or consent seeking reorganization or
     relief under any applicable federal or state law,

          (d) Salem Holding, any Guarantor or any Restricted Subsidiary of Salem
     Holding (x) consents to the filing of such petition or the appointment of,
     or taking possession by, a custodian, receiver, liquidator, assignee,
     trustee, sequestrator or other similar official, of Salem Holding, any
     Guarantor or such Restricted Subsidiary or of any substantial part of their
     respective property, (y) makes an assignment for the benefit of creditors
     or (z) admits in writing its inability to pay its debts generally as they
     become due or

          (e) Salem Holding, any Guarantor or any Restricted Subsidiary of Salem
     Holding takes any corporate action in furtherance of any such actions in
     this paragraph (ix).

     If an Event of Default (other than as specified in clauses (viii) and (ix)
of the prior paragraph) shall occur and be continuing, the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes
outstanding may, and the Trustee at the request of such holders shall, declare
all unpaid principal of, premium, if any, and accrued interest on, all the Notes
to be due and payable immediately by a notice in writing to Salem Holding (and
to the Trustee if given by the holders of the Notes), provided that so long as
the Bank Credit Agreement is in effect, such declaration shall not become
effective until the earlier of:

     - five business days after receipt of such notice of acceleration from the
       holders or the Trustee by the agent under the Bank Credit Agreement or

     - acceleration of the Indebtedness under the Bank Credit Agreement.

Thereupon the Trustee may, at its discretion, proceed to protect and enforce the
rights of the holders of Notes by appropriate judicial proceedings.

     If an Event of Default specified in clause (viii) or (ix) of the first
paragraph of this description of "Events of Default" occurs and is continuing,
then all the Notes shall ipso facto become and be immediately due and payable,
in an amount equal to the principal amount of the Notes, together with accrued
and unpaid interest, if any, to the date the Notes become due and payable,
without any declaration or other act on the part of the Trustee or any holder.
The Trustee or, if notice of acceleration

                                       116


is given by the holders of the Notes, the holders of the Notes shall give notice
to the agent under the Bank Credit Agreement of such acceleration.

     After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the holders of a
majority in aggregate principal amount of Notes outstanding, by written notice
to Salem Holding and the Trustee, may rescind and annul such declaration if:

     - Salem Holding has paid or deposited with the Trustee a sum sufficient to
       pay

       -- all sums paid or advanced by the Trustee under the Indenture and the
          reasonable compensation, expenses, disbursements and advances of the
          Trustee, its agents and counsel,

       -- all overdue interest on all Notes,

      -- the principal of and premium, if any, on any Notes which have become
         due otherwise than by such declaration of acceleration and interest
         thereon at a rate borne by the Notes and

      -- to the extent that payment of such interest is lawful, interest upon
         overdue interest at the rate borne by the Notes; and

     - all Events of Default, other than the non-payment of principal of the
       Notes which have become due solely by such declaration of acceleration,
       have been cured or waived.

     The holders of not less than a majority in aggregate principal amount of
the Notes outstanding may on behalf of the holders of all the Notes waive any
past default under the Indenture and its consequences, except a default in the
payment of the principal of, premium, if any, or interest on any Note, or in
respect of a covenant or provision which under the Indenture cannot be modified
or amended without the consent of the holder of each Note outstanding.

     Salem Holding is also required to notify the Trustee within five business
days of the occurrence of any Default. Salem Holding is required to deliver to
the Trustee, on or before a date not more than 60 days after the end of each
quarter and not more than 120 days after the end of each fiscal year, a written
statement as to compliance with the Indenture, including whether or not any
default has occurred. The Trustee is under no obligation to exercise any of the
rights or powers vested in it by the Indenture at the request or direction of
any of the holders of the Notes unless such holders offer to the Trustee
security or indemnity satisfactory to the Trustee against the costs, expenses
and liabilities which might be incurred thereby.

     The Trust Indenture Act contains limitations on the rights of the Trustee,
should it become a creditor of Salem Holding or any Guarantor, to obtain payment
of claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Trustee is permitted
to engage in other transactions, provided that if it acquires any conflicting
interest it must eliminate such conflict upon the occurrence of an Event of
Default or else resign.

DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE

     Salem Holding may, at its option, at any time, elect to have the
obligations of Salem Holding, each of the Guarantors and any other obligor upon
the Notes discharged with respect to the outstanding Notes ("defeasance"). Such
defeasance means that Salem Holding, each of the Guarantors and any other
obligor under the Indenture shall be deemed to have paid and discharged the
entire Indebtedness represented by the outstanding Notes, except for:

     - the rights of holders of outstanding Notes to receive payments in respect
       of the principal of, premium, if any, and interest on such Notes when
       such payments are due,

                                       117


     - Salem Holding's obligations with respect to the Notes concerning issuing
       temporary Notes, registration of Notes, mutilated, destroyed, lost or
       stolen Notes, and the maintenance of an office or agency for payment and
       money for security payments held in trust,

     - the rights, powers, trusts, duties and immunities of the Trustee, and

     - the defeasance provisions of the Indenture.

In addition, Salem Holding may, at its option and at any time, elect to have the
obligations of Salem Holding and any Guarantor released with respect to certain
covenants that are described in the Indenture ("covenant defeasance") and any
omission to comply with such obligations shall not constitute a Default or an
Event of Default with respect to the Notes. In the event covenant defeasance
occurs, certain events (not including non-payment, enforceability of any
Guarantee, bankruptcy and insolvency events) described under "-- Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.

     In order to exercise either defeasance or covenant defeasance,

     - Salem Holding must irrevocably deposit with the Trustee, in trust, for
       the benefit of the holders of the Notes, cash in United States dollars,
       U.S. Government Obligations (as defined in the Indenture), or a
       combination thereof, in such amounts as will be sufficient, in the
       opinion of a nationally recognized firm of independent public accountants
       or a nationally recognized investment banking firm expressed in a written
       certification thereof delivered to the Trustee, to pay and discharge the
       principal of, premium, if any, and interest on the outstanding Notes on
       the Stated Maturity of such principal or installment of principal or
       interest (or on any date after July 1, 2006 (such date being referred to
       as the "Defeasance Redemption Date"), if when exercising either
       defeasance or covenant defeasance, Salem Holding has delivered to the
       Trustee an irrevocable notice to redeem all of the outstanding Notes on
       the Defeasance Redemption Date);

     - in the case of defeasance, Salem Holding shall have delivered to the
       Trustee an opinion of independent counsel in the United States stating
       that

      -- Salem Holding has received from, or there has been published by, the
         Internal Revenue Service a ruling or

      -- since the date of the Indenture, there has been a change in the
         applicable federal income tax law,

in either case to the effect that, and based thereon such opinion of independent
counsel in the United States shall confirm that, the holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such defeasance had not occurred;

     - in the case of covenant defeasance, Salem Holding shall have delivered to
       the Trustee an opinion of independent counsel in the United States to the
       effect that the holders of the outstanding Notes will not recognize
       income, gain or loss for federal income tax purposes as a result of such
       covenant defeasance and will be subject to federal income tax on the same
       amounts, in the same manner and at the same times as would have been the
       case if such covenant defeasance had not occurred;

     - no Default or Event of Default shall have occurred and be continuing on
       the date of such deposit or insofar as clause (viii) or (ix) under the
       first paragraph under "-- Events of Default" are concerned, at any time
       during the period ending on the 91st day after the date of deposit;

     - such defeasance or covenant defeasance shall not cause the Trustee for
       the Notes to have a conflicting interest with respect to any securities
       of Salem Holding or any Guarantor;

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     - such defeasance or covenant defeasance shall not result in a breach or
       violation of, or constitute a Default under, the Indenture or any other
       material agreement or instrument to which Salem Holding or any Guarantor
       is a party or by which it is bound,

     - Salem Holding shall have delivered to the Trustee an opinion of
       independent counsel to the effect that

       -- the trust funds will not be subject to any rights of holders of Senior
          Indebtedness or Guarantor Senior Indebtedness, including, without
          limitation, those arising under the Indenture and

       -- after the 91st day following the deposit, the trust funds will not be
          subject to the effect of any applicable bankruptcy, insolvency,
          reorganization or similar laws affecting creditors' rights generally;

     - Salem Holding shall have delivered to the Trustee an officers'
       certificate stating that the deposit was not made by Salem Holding with
       the intent of preferring the holders of the Notes or any Guarantee over
       the other creditors of Salem Holding or any Guarantor with the intent of
       defeating, hindering, delaying or defrauding creditors of Salem Holding,
       any Guarantor or others;

     - no event or condition shall exist that would prevent Salem Holding from
       making payments of the principal of, premium, if any, and interest on the
       Notes on the date of such deposit or at any time ending on the 91st day
       after the date of such deposit; and

     - Salem Holding shall have delivered to the Trustee an officers'
       certificate and an opinion of independent counsel, each stating that all
       conditions precedent provided for relating to either the defeasance or
       the covenant defeasance, as the case may be, have been complied with.

SATISFACTION AND DISCHARGE

     The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of Notes, and certain other
rights as expressly provided for in the Indenture) as to all outstanding Notes
when

     - either

       -- all the Notes theretofore authenticated and delivered (except lost,
          stolen or destroyed Notes which have been replaced or paid) have been
          delivered to the Trustee for cancellation or

       -- all Notes not theretofore delivered to the Trustee for cancellation
          (x) have become due and payable, or (y) will become due and payable at
          their Stated Maturity within one year, or (z) are to be called for
          redemption within one year under arrangements satisfactory to the
          Trustee for the giving of notice of redemption by the Trustee in the
          name, and at the expense, of Salem Holding and Salem Holding or any
          Guarantor has irrevocably deposited or caused to be deposited with the
          Trustee funds in an amount sufficient to pay and discharge the entire
          indebtedness on the Notes not theretofore delivered to the Trustee for
          cancellation, including principal of, premium, if any, and accrued
          interest at such Stated Maturity or redemption date,

     - Salem Holding or any Guarantor has paid or caused to be paid all other
       sums payable under the Indenture by Salem Holding or any Guarantor, and

     - Salem Holding has delivered to the Trustee an officers' certificate and
       an opinion of counsel stating that

       -- all conditions precedent under the Indenture relating to the
          satisfaction and discharge of the Indenture have been complied with
          and

                                       119


       -- such satisfaction and discharge will not result in a breach or
          violation of, or constitute a default under, the Indenture or any
          other material agreement or instrument to which Salem Holding or any
          Guarantor is a party or by which Salem Holding or any Guarantor is
          bound.

MODIFICATIONS AND AMENDMENTS

     From time to time, Salem Holding, the Guarantors and the Trustee, without
the consent of the holders of Notes, may amend the Indenture for certain
specified purposes, including curing ambiguities, defects or inconsistencies.
Other modifications and amendments of the Indenture may be made by Salem
Holding, the Guarantors and the Trustee with the consent of the holders of not
less than a majority in aggregate principal amount of the outstanding Notes;
provided, however, that no such modification or amendment may, without the
consent of the holder of each outstanding Note affected thereby:

     - change the Stated Maturity of the principal of, or any installment of
       interest on, any Note or reduce the principal amount thereof or the rate
       of interest thereon or any premium payable upon the redemption thereof,
       or change the coin or currency in which the principal of any Note or any
       premium or the interest thereon is payable, or impair the right to
       institute suit for the enforcement of any such payment after the Stated
       Maturity thereof (or in the case of redemption, on or after the
       redemption date);

     - amend, change or modify the obligation of Salem Holding to make and
       consummate an Offer with respect to any Asset Sale or Asset Sales in
       accordance with "-- Certain Covenants -- Limitation on Sale of Assets" or
       the obligation of Salem Holding to make and consummate a Change of
       Control Offer in the event of a Change of Control in accordance with
       "-- Certain Covenants -- Purchase of Notes Upon a Change of Control,"
       including amending, changing or modifying any definitions with respect
       thereto;

     - reduce the percentage in principal amount of outstanding Notes, the
       consent of whose holders is required for any such supplemental indenture,
       or the consent of whose holders is required for any waiver of compliance
       with certain provisions of the Indenture or certain defaults or with
       respect to any Guarantee;

     - modify any of the provisions relating to supplemental indentures
       requiring the consent of holders or relating to the waiver of past
       defaults or relating to the waiver of certain covenants, except to
       increase the percentage of outstanding Notes required for such actions or
       to provide that certain other provisions of the Indenture cannot be
       modified or waived without the consent of the holder of each Note
       affected thereby;

     - except as otherwise permitted under "-- Consolidation, Merger, Sale of
       Assets," consent to the assignment or transfer by Salem Holding or any
       Guarantor of any of its rights and obligations under the Indenture; or

     - amend or modify any of the provisions of the Indenture relating to the
       subordination of the Notes or any Guarantee in any manner adverse to the
       holders of the Notes or any Guarantee.

     The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.

GOVERNING LAW

     The Indenture, the Notes and the Guarantees will be governed by, and
construed in accordance with the laws of the State of New York.

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CERTAIN DEFINITIONS

     "Acquired Indebtedness" means Indebtedness of a Person

     - existing at the time such Person becomes a Subsidiary or

     - assumed in connection with the acquisition of assets from such Person,

in each case, other than Indebtedness incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary or such acquisition.
Acquired Indebtedness shall be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person becomes a
Subsidiary.

     "Affiliate" means, with respect to any specified Person,

     - any other Person directly or indirectly controlling or controlled by or
       under direct or indirect common control with such specified Person,

     - any other Person that owns, directly or indirectly, 5% or more of such
       Person's Equity Interests or any officer or director of any such Person
       or other Person or, with respect to any natural Person, any person having
       a relationship with such Person or other Person by blood, marriage or
       adoption not more remote than first cousin or

     - any other Person 10% or more of the voting Equity Interests of which are
       beneficially owned or held directly or indirectly by such specified
       person.

For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person directly or indirectly, whether through ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.

     "Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
Sale and Leaseback Transaction) (collectively, a "transfer"), directly or
indirectly, in one or a series of related transactions, of

     - any Equity Interest of any Restricted Subsidiary of Salem Holding (other
       than directors' qualifying shares and, to the extent required by local
       ownership laws in foreign countries, shares owned by foreign
       shareholders);

     - all or substantially all of the properties and assets of any division or
       line of business of Salem Holding or its Restricted Subsidiaries; or

     - any other properties or assets of Salem Holding or any of its Restricted
       Subsidiaries, other than in the ordinary course of business.

For the purposes of this definition, the term "Asset Sale" shall not include any
transfer of properties and assets

     - that is governed by the provisions described under "-- Consolidation,
       Merger, Sale of Assets" or "Limitations on Asset Swaps,"

     - that is by Salem Holding to any Wholly Owned Restricted Subsidiary of
       Salem Holding, or by any Restricted Subsidiary of Salem Holding to Salem
       Holding or any Wholly Owned Restricted Subsidiary of Salem Holding, in
       accordance with the terms of the Indenture,

     - that aggregates not more than $1.0 million in gross proceeds, or

     - any Restricted Payments permitted under the covenant described in
       "Limitation on Restricted Payments" or any Permitted Investment.
                                       121


     "Asset Swap" means an Asset Sale by Salem Holding or any Restricted
Subsidiary of Salem Holding in exchange for properties or assets that will be
used in the business of Salem Holding and its Restricted Subsidiaries existing
on the date of the Indenture or reasonably related thereto.

     "Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by (ii)
the sum of all such principal payments.

     "Bank Credit Agreement" means the Fourth Amended and Restated Credit
Agreement, dated as of June 15, 2001, among Salem Holding, the lenders named
therein and The Bank of New York as administrative agent, as such agreement may
be amended, renewed, extended, substituted, refinanced, restructured, replaced,
supplemented or otherwise modified from time to time (including, without
limitation, any successive renewals, extensions substitutions, refinancings,
restructurings, replacements, supplementations or other modifications of the
foregoing). For all purposes under the Indenture, "Bank Credit Agreement" shall
include any amendments, renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplements or any other modifications that
increase the principal amount of the Indebtedness or the commitments to lend
thereunder and have been made in compliance with "-- Certain
Covenants -- Limitation on Indebtedness"; provided that, for purposes of the
definition of "Permitted Indebtedness" in the covenant entitled "Limitation on
Indebtedness," no such increase may result in the principal amount of
Indebtedness of Salem Holding under the Bank Credit Agreement that is permitted
to be incurred pursuant to clause (i) of the definition of "Permitted
Indebtedness" to exceed the amount specified in such clause (i).

     "Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as
amended, or any similar United States federal or state law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or
relief of debtors or any amendment to, succession to or change in any such law.

     "Capital Lease Obligation" means, with respect to any Person, any
obligation of such Person and its Restricted Subsidiaries on a Consolidated
basis under any capital lease of real or personal property which, in accordance
with GAAP, has been recorded as a capitalized lease obligation.

     "Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of the Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.

     "Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication, the sum of

     - the interest expense of such Person and its Consolidated Restricted
       Subsidiaries for such period, on a Consolidated basis, including, without
       limitation,

       -- amortization of debt discount,

       -- the net cost under Interest Rate Agreements (including amortization of
discounts),

       -- the interest portion of any deferred payment obligation and

       -- accrued interest, plus

     - the interest component of the Capital Lease Obligations paid, accrued
       and/or scheduled to be paid or accrued by such Person during such period,
       and all capitalized interest of such Person and its Consolidated
       Restricted Subsidiaries, in each case as determined in accordance with
       GAAP consistently applied.
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     "Consolidated Net Income" means, with respect to any Person for any period,
the Consolidated net income (or loss) of such Person and its Consolidated
Restricted Subsidiaries for such period as determined in accordance with GAAP
consistently applied, adjusted, to the extent included in calculating such net
income (or loss), by excluding, without duplication,

     - all extraordinary gains but not losses (less all fees and expenses
       relating thereto),

     - the portion of net income (or loss) of such Person and its Consolidated
       Restricted Subsidiaries allocable to interests in unconsolidated Persons
       or Unrestricted Subsidiaries, except to the extent of the amount of
       dividends or distributions actually paid to such Person or its
       Consolidated Restricted Subsidiaries by such other Person during such
       period,

     - net income (or loss) of any other Person combined with such Person or any
       of its Restricted Subsidiaries on a "pooling of interests" basis
       attributable to any period prior to the date of combination,

     - any gain or loss, net of taxes, realized upon the termination of any
       employee pension benefit plan,

     - net gains but not losses (less all fees and expenses relating thereto) in
       respect of dispositions of assets other than in the ordinary course of
       business, or

     - the net income of any Restricted Subsidiary of such Person to the extent
       that the declaration of dividends or similar distributions by such
       Restricted Subsidiary of that income is not at the time permitted,
       directly or indirectly, by operation of the terms of its charter or any
       agreement, instrument, judgment, decree, order, statute, rule or
       governmental regulation applicable to such Restricted Subsidiary or its
       shareholders.

     "Consolidated Net Worth" means the Consolidated equity of the holders of
Equity Interests (excluding Disqualified Equity Interests) of Salem Holding and
its Restricted Subsidiaries, as determined in accordance with GAAP consistently
applied.

     "Consolidation" means, with respect to any Person, the consolidation of the
accounts of such Person and each of its subsidiaries (other than any
Unrestricted Subsidiaries) if and to the extent the accounts of such Person and
each of its subsidiaries (other than any Unrestricted Subsidiaries) would
normally be consolidated with those of such Person, all in accordance with GAAP
consistently applied. The term "Consolidated" shall have a similar meaning.

     "Cumulative Consolidated Interest Expense" means, as of any date of
determination, Consolidated Interest Expense of (x) Parent from the date of the
Existing Indenture to but not including the Succession Date and (y) Salem
Holding from and including the Succession Date to the end of Salem Holding's
most recently ended full fiscal quarter prior to such date, taken as a single
accounting period.

     "Cumulative Operating Cash Flow" means, as of any date of determination,
Operating Cash Flow of (x) Parent from the date of the Existing Indenture to but
not including the Succession Date and (y) Salem Holding from and including the
Succession Date to the end of Salem Holding's most recently ended full fiscal
quarter prior to such date, taken as a single accounting period.

     "Debt to Operating Cash Flow Ratio" means, as of any date of determination,
the ratio of (a) the aggregate principal amount of all outstanding Indebtedness
of Salem Holding and its Restricted Subsidiaries as of such date on a
Consolidated basis plus the aggregate liquidation preference or redemption
amount of all Disqualified Equity Interests of Salem Holding (excluding any such
Disqualified Equity Interests held by Salem Holding or a Wholly Owned Restricted
Subsidiary of Salem Holding), to (b) Operating Cash Flow of Salem Holding and
its Restricted Subsidiaries on a Consolidated basis for the

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four most recent full quarters ending immediately prior to such date, determined
on a pro forma basis (and after giving pro forma effect to:

     - the incurrence of such Indebtedness and (if applicable) the application
       of the net proceeds therefrom, including to refinance other Indebtedness,
       as if such Indebtedness was incurred, and the application of such
       proceeds occurred, at the beginning of such four-quarter period;

     - the incurrence, repayment or retirement of any other Indebtedness by
       Salem Holding and its Restricted Subsidiaries since the first day of such
       four-quarter period as if such Indebtedness was incurred, repaid or
       retired at the beginning of such four-quarter period (except that, in
       making such computation, the amount of Indebtedness under any revolving
       credit facility shall be computed based upon the average balance of such
       Indebtedness at the end of each month during such four-quarter period);

     - in the case of Acquired Indebtedness, the related acquisition, as if such
       acquisition had occurred at the beginning of such four-quarter period;
       and

     - any acquisition or disposition by Salem Holding and its Restricted
       Subsidiaries of any company or any business or any assets out of the
       ordinary course of business, or any related repayment of Indebtedness, in
       each case since the first day of such four-quarter period, assuming such
       acquisition, disposition or repayment had been consummated on the first
       day of such four-quarter period).

     "Default" means any event which is, or after notice or passage of any time
or both would be, an Event of Default.

     "Disqualified Equity Interests" means any Equity Interests that, either by
their terms or by the terms of any security into which they are convertible or
exchangeable or otherwise, are or upon the happening of an event or passage of
time would be required to be redeemed prior to any Stated Maturity of the
principal of the Notes or are redeemable at the option of the holder thereof at
any time prior to any such Stated Maturity, or are convertible into or
exchangeable for debt securities at any time prior to any such Stated Maturity
at the option of the holder thereof.

     "Equity Interest" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, and
limited liability company interests of such Person, including any Preferred
Equity Interests.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     "Existing Indenture" means the Indenture, dated September 25, 1997, among
Parent, the guarantors party thereto and The Bank of New York as trustee, as
supplemented by Supplemental Indenture No. 1, dated as of March 31, 1999, by and
between Parent, the guarantors party thereto and The Bank of New York as trustee
and by Supplemental Indenture No. 2, dated as of August 24, 2000, by and between
Parent, Salem Holding, the guarantors party thereto and The Bank of New York as
trustee, pursuant to which the Existing Notes were issued.

     "Existing Notes" means the 9 1/2% Senior Subordinated Notes of Salem
Holding (as successor issuer to Parent) due October 1, 2007 issued pursuant to
the Existing Indenture and outstanding as of the date of the Indenture.

     "Existing Notes Guarantee" means the guarantee by Parent or any of its
Subsidiaries of the obligations of Salem Holding and any other obligor under the
Existing Indenture or under the Existing Notes, pursuant to a guarantee given in
accordance with the Existing Indenture.

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     "Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy.

     "Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, which
are in effect on the date of the Indenture.

     "Guarantee" means the guarantee by any Guarantor of Salem Holding's
Indenture Obligations pursuant to a guarantee given in accordance with the
Indenture.

     "Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person referred to in the definition of Indebtedness
guaranteed directly or indirectly in any manner by such Person, or in effect
guaranteed directly or indirectly by such Person through an agreement:

     - to pay or purchase such Indebtedness or to advance or supply funds for
       the payment or purchase of such Indebtedness,

     - to purchase, sell or lease (as lessee or lessor) property, or to purchase
       or sell services, primarily for the purpose of enabling the debtor to
       make payment of such Indebtedness or to assure the holder of such
       Indebtedness against loss,

     - to supply funds to, or in any other manner invest in, the debtor
       (including any agreement to pay for property or services without
       requiring that such property be received or such services be rendered),

     - to maintain working capital or equity capital of the debtor, or otherwise
       to maintain the net worth, solvency or other financial condition of the
       debtor or

     - otherwise to assure a creditor against loss;

provided that the term "guarantee" shall not include endorsements for collection
or deposit, in either case in the ordinary course of business.

     "Guarantor" means each Person listed as a guarantor in the Indenture or any
other guarantor of the Indenture Obligations. As of the date of the Indenture,
the Guarantors consist of Parent and all of Parent's Subsidiaries (other than
Salem Holding).

     "Indebtedness" means, with respect to any Person, without duplication,

          (i) all indebtedness of such Person for borrowed money or for the
     deferred purchase price of property or services, excluding any trade
     payables and other accrued current liabilities arising in the ordinary
     course of business, but including, without limitation, all obligations,
     contingent or otherwise, of such Person in connection with any letters of
     credit issued under letter of credit facilities, acceptance facilities or
     other similar facilities and in connection with any agreement to purchase,
     redeem, exchange, convert or otherwise acquire for value any Equity
     Interests of such Person, or any warrants, rights or options to acquire
     such Equity Interests, now or hereafter outstanding,

          (ii) all obligations of such Person evidenced by bonds, notes,
     debentures or other similar instruments,

          (iii) all indebtedness created or arising under any conditional sale
     or other title retention agreement with respect to property acquired by
     such Person (even if the rights and remedies of the seller or lender under
     such agreement in the event of default are limited to repossession or sale
     of such property), but excluding trade payables arising in the ordinary
     course of business,

          (iv) all obligations under Interest Rate Agreements of such Person,

          (v) all Capital Lease Obligations of such Person,

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          (vi) all Indebtedness referred to in clauses (i) through (v) above of
     other Persons and all dividends of other Persons, the payment of which is
     secured by (or for which the holder of such Indebtedness has an existing
     right, contingent or otherwise, to be secured by) any Lien, upon or with
     respect to property (including, without limitation, accounts and contract
     rights) owned by such Person, even though such Person has not assumed or
     become liable for the payment of such Indebtedness,

          (vii) all Guaranteed Debt of such Person,

          (viii) all Disqualified Equity Interests valued at the greater of
     their voluntary or involuntary maximum fixed repurchase price plus accrued
     and unpaid dividends, and

          (ix) any amendment, supplement, modification, deferral, renewal,
     extension, refunding or refinancing of any liability of the types referred
     to in clauses (i) through (viii) above.

The amount of Indebtedness of any Person at any date shall be, without
duplication, the principal amount that would be shown on a balance sheet of such
Person prepared as of such date in accordance with GAAP and the maximum
determinable liability of any Guaranteed Debt referred to in clause (vii) above
at such date; provided, however, that the amount outstanding at any time of any
Indebtedness issued with original issue discount shall be deemed to be the face
amount of such Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at such time as determined in
conformity with GAAP. The Indebtedness of Salem Holding and its Restricted
Subsidiaries shall not include any Indebtedness of Unrestricted Subsidiaries so
long as such Indebtedness is non-recourse to Salem Holding and its Restricted
Subsidiaries. For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Equity Interests which do not have a fixed repurchase price shall
be calculated in accordance with the terms of such Disqualified Equity Interests
as if such Disqualified Equity Interests were purchased on any date on which
Indebtedness shall be required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the Fair Market Value of such
Disqualified Equity Interests, such Fair Market Value to be determined in good
faith by the Board of Directors of the issuer of such Disqualified Equity
Interests.

     "Indenture Obligations" means the obligations of Salem Holding and any
other obligor under the Indenture or under the Notes, including any Guarantor,
to pay principal, premium, if any, and interest when due and payable, and all
other amounts due or to become due under or in connection with the Indenture,
the Notes and the performance of all other obligations to the Trustee and the
holders under the Indenture and the Notes, according to the terms thereof.

     "Independent Director" means a director of Salem Holding other than a
director

     - who (apart from being a director of Parent, Salem Holding or any
       Subsidiary) is an employee, insider, associate or Affiliate of Parent,
       Salem Holding or a Subsidiary or has held any such position during the
       previous five years or

     - who is a director, an employee, insider, associate or Affiliate of
       another party to the transaction in question.

     "Interest Rate Agreements" means one or more of the following agreements
which shall be entered into by one or more financial institutions: interest rate
protection agreements (including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements) and/or other types of interest rate
hedging agreements from time to time.

     "Investments" means, with respect to any Person, directly or indirectly,
any advance, loan (including guarantees), or other extension of credit or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase, acquisition or ownership by such Person of any Equity
Interests, bonds, notes, debentures or

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other securities issued or owned by any other Person and all other items that
would be classified as investments on a balance sheet prepared in accordance
with GAAP.

     "Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind (including any conditional sale or other
title retention agreement, any leases in the nature thereof, and any agreement
to give any security interest), real or personal, movable or immovable, now
owned or hereafter acquired.

     "Maturity" means, when used with respect to any Note, the date on which the
principal of such Note becomes due and payable as provided in the Note or as
provided in the Indenture, whether at Stated Maturity, the purchase date, or the
redemption date and whether by declaration of acceleration, Offer in respect of
Excess Proceeds, Change of Control, call for redemption or otherwise.

     "Net Cash Proceeds" means

     - with respect to any Asset Sale by any Person, the proceeds thereof in the
       form of cash or Temporary Cash Investments including payments in respect
       of deferred payment obligations when received in the form of, or stock or
       other assets when disposed of for, cash or Temporary Cash Investments
       (except to the extent that such obligations are financed or sold with
       recourse to Salem Holding or any Restricted Subsidiary of Salem Holding)
       net of

       -- brokerage commissions and other reasonable fees and expenses
          (including fees and expenses of counsel and investment bankers)
          related to such Asset Sale,

       -- provisions for all taxes payable as a result of such Asset Sale,

       -- payments made to retire Indebtedness where payment of such
          Indebtedness is secured by the assets or properties the subject of
          such Asset Sale or would cause a required repayment under the Bank
          Credit Agreement,

       -- amounts required to be paid to any Person (other than Salem Holding or
          any Restricted Subsidiary of Salem Holding) owning a beneficial
          interest in the assets subject to the Asset Sale and

       -- appropriate amounts to be provided by Salem Holding or any Restricted
          Subsidiary of Salem Holding, as the case may be, as a reserve, in
          accordance with GAAP, against any liabilities associated with such
          Asset Sale and retained by Salem Holding or any Restricted Subsidiary
          of Salem Holding, as the case may be, after such Asset Sale,
          including, without limitation, pension and other post-employment
          benefit liabilities, liabilities related to environmental matters and
          liabilities under any indemnification obligations associated with such
          Asset Sale, all as reflected in an officers' certificate delivered to
          the Trustee

     and

     - with respect to any issuance or sale of Equity Interests by any Person,
       or debt securities or Equity Interests of such Person that have been
       converted into or exchanged for Equity Interests, as referred to under
       "-- Certain Covenants -- Limitation on Restricted Payments," the proceeds
       of such issuance or sale in the form of cash or Temporary Cash
       Investments, including payments in respect of deferred payment
       obligations when received in the form of, or stock or other assets when
       disposed for, cash or Temporary Cash Investments (except to the extent
       that such obligations are financed or sold with recourse to such Person
       or any Restricted Subsidiary), net of attorney's fees, accountant's fees
       and brokerage, consultation, underwriting and other fees and expenses
       actually incurred in connection with such issuance or sale and net of
       taxes paid or payable as a result thereof.

                                       127


     "Operating Cash Flow" means, with respect to any Person for any period, the
Consolidated Net Income of such Person and its Restricted Subsidiaries for such
period, plus

     - extraordinary net losses and net losses on sales of assets outside the
       ordinary course of business during such period, to the extent such losses
       were deducted in computing Consolidated Net Income, plus

     - provision for taxes based on income or profits, to the extent such
       provision for taxes was included in computing such Consolidated Net
       Income, and any provision for taxes utilized in computing the net losses
       under the immediately preceding clause hereof, plus

     - Consolidated Interest Expense of such Person and its Restricted
       Subsidiaries for such period, plus

     - depreciation, amortization and all other non-cash charges, to the extent
       such depreciation, amortization and other non-cash charges were deducted
       in computing such Consolidated Net Income (including amortization of
       goodwill and other intangibles).

     "Parent" means Salem Communications Corporation, a Delaware corporation,
the parent of Salem Holding, and any successor Person succeeding to the direct
or indirect ownership of Salem Holding.

     "Parent Equity Sale Proceeds" means the aggregate amount of Net Cash
Proceeds received by Parent after the date of the Existing Indenture to but not
including the Succession Date from capital contributions (other than from any of
its Subsidiaries) or from the issuance or sale (other than to any of its
Subsidiaries) of its Qualified Equity Interests (except, in each case, to the
extent such proceeds were used to purchase, redeem or otherwise retire Equity
Interests or Subordinated Indebtedness).

     "Parent Subsidiary Guarantor" means any Subsidiary of Parent that is a
Guarantor of the Notes other than a Restricted Subsidiary Guarantor.

     "Pari Passu Indebtedness" means the Existing Notes or any Existing Notes
Guarantee, as the case may be, and any other Indebtedness of Salem Holding or
any Guarantor that is pari passu in right of payment to the Notes or any
Guarantee, as the case may be.

     "Permitted Investments" means any of the following:

     - Temporary Cash Investments;

     - Investments by Salem Holding or any of its Restricted Subsidiaries in a
       Restricted Subsidiary Guarantor and Investments by any Restricted
       Subsidiary in Salem Holding;

     - Investments by Salem Holding or any of its Restricted Subsidiaries in
       another Person, if as a result of such Investment (a) such other Person
       becomes a Restricted Subsidiary of Salem Holding that is or would be a
       Guarantor or (b) such other Person is merged or consolidated with or
       into, or transfers or conveys all or substantially all of its assets to,
       Salem Holding or a Restricted Subsidiary of Salem Holding that is or
       would be a Guarantor;

     - Promissory notes received as a result of Asset Sales permitted under the
       provisions of "Limitation on Sales of Assets";

     - Investments in existence on the date of the Indenture;

     - Direct or indirect loans to employees, or to a trustee for the benefit of
       such employees, of Salem Holding or any of its Restricted Subsidiaries in
       an aggregate amount outstanding at any time not exceeding $1.0 million;

     - Permitted Non-Commercial Educational Station Investments; provided that
       immediately after giving effect to any such Investment, Salem Holding
       could incur $1.00 of additional Indebtedness

                                       128


       (other than Permitted Indebtedness) pursuant to the restrictions under
       the "-- Certain Covenants -- Limitation on Indebtedness" covenant;

     - Interest Rate Agreements entered into in the ordinary course of Salem
       Holding's or a Restricted Subsidiary's business in compliance with the
       covenant described in "Limitation on Indebtedness"; and

     - Other Investments that do not exceed $5.0 million at any one time
       outstanding.

     "Permitted Non-Commercial Educational Station Investment" means a loan made
by Salem Holding or a Restricted Subsidiary of Salem Holding to a non-profit
entity, the proceeds of which are used to acquire assets used in the operation
of a radio station; provided that so long as any such Investment remains
outstanding

     - such loan shall be evidenced by a promissory note and shall not be
       subordinated to any other Indebtedness of such non-profit entity;

     - at least 40% of the board seats (or other comparable governing body) of
       such non-profit entity shall be held by executive officers of Salem
       Holding; and

     - a technical and professional services agreement shall be in full force
       and effect between such non-profit entity and Salem Holding pursuant to
       which Salem Holding shall be compensated for providing engineering,
       accounting, legal and other assistance in connection with the operation
       of the station licensed to such non-profit entity (which agreement shall
       contain customary terms and conditions for technical and professional
       services agreements in the radio broadcasting industry generally).

     "Permitted Subsidiary Indebtedness" means:

     - Indebtedness of any Restricted Subsidiary Guarantor under Capital Lease
       Obligations incurred in the ordinary course of business; and

     - Indebtedness of any Restricted Subsidiary Guarantor

       -- issued to finance or refinance the purchase or construction of any
          assets of such Restricted Subsidiary Guarantor or

       -- secured by a Lien on any assets of such Restricted Subsidiary
          Guarantor where the lender's sole recourse is to the assets so
          encumbered,

     in either case (x) to the extent the purchase or construction prices for
     such assets are or should be included in "property and equipment" in
     accordance with GAAP and (y) if the purchase or construction of such assets
     is not part of any acquisition of a Person or business unit.

     "Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivisions thereof.

     "Preferred Equity Interest" means, as applied to the Equity Interest of any
Person, an Equity Interest of any class or classes (however designated) which is
preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over Equity Interests of any other class of such
Person.

     "Public Equity Offering" means, with respect to any Person, an underwritten
public offering by such Person of some or all of its Equity Interests (other
than Disqualified Equity Interests), the net proceeds of which (after deducting
any underwriting discounts and commissions) (x) to Salem Holding or (y) received
by Salem Holding as a capital contribution from Parent, as the case may be,
exceed $10.0 million.
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     "Qualified Equity Interests" of any Person means any and all Equity
Interests of such Person other than Disqualified Equity Interests.

     "Restricted Subsidiary" of a Person means any Subsidiary of such Person
other than an Unrestricted Subsidiary.

     "Restricted Subsidiary Guarantor" means any Guarantor of the Notes that is
a Restricted Subsidiary of Salem Holding.

     "Sale and Leaseback Transaction" means any transaction or series of related
transactions pursuant to which Salem Holding or a Restricted Subsidiary sells or
transfers any property or asset in connection with the leasing, or the resale
against installment payments, of such property or asset to the seller or
transferor.

     "Salem Holding" means Salem Communications Holding Corporation, a
corporation incorporated under the laws of Delaware, until a successor Person
shall have become such pursuant to the applicable provisions of the Indenture,
and thereafter "Salem Holding" shall mean such successor Person.

     "Securities Act" means the Securities Act of 1933, as amended.

     "Stated Maturity" means, when used with respect to any Indebtedness or any
installment of interest thereon, the date specified in such Indebtedness as the
fixed date on which the principal of such Indebtedness or such installment of
interest is due and payable.

     "Subordinated Indebtedness" means Indebtedness of Salem Holding or any
Guarantor subordinated in right of payment to the Notes or any Guarantee, as the
case may be and, with respect to Parent for the period from the date of the
Existing Indenture to but not including the Succession Date, Indebtedness
subordinated in right of payment to the Existing Notes.

     "Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership, joint venture, association or other business
entity a majority of the equity ownership or the Voting Stock of which is at the
time owned, directly or indirectly, by such Person or by one or more other
Subsidiaries of such Person, or by such Person and one or more of its other
Subsidiaries.

     "Succession Date" means August 24, 2000, the date that Salem Holding became
the successor obligor to Parent with respect to the Existing Notes pursuant to
the Existing Indenture.

     "Temporary Cash Investments" means

          (i) any evidence of Indebtedness, maturing not more than one year
     after the date of acquisition, issued by the United States of America, or
     an instrumentality or agency thereof and guaranteed fully as to principal,
     premium, if any, and interest by the United States of America;

          (ii) any certificate of deposit, maturing not more than one year after
     the date of acquisition, issued by, or time deposit of, a commercial
     banking institution (including the Trustee) that is a member of the Federal
     Reserve System and that has combined capital and surplus and undivided
     profits of not less than $500.0 million, whose debt has a rating, at the
     time as of which any investment therein is made, of "P-1" (or higher)
     according to Moody's Investors Service, Inc. ("Moody's") or any successor
     rating agency or "A-1" (or higher) according to Standard & Poor's
     Corporation ("S&P") or any successor rating agency;

          (iii) commercial paper, maturing not more than one year after the date
     of acquisition, issued by a corporation (other than an Affiliate or
     Subsidiary of Salem Holding, but including the Trustee) organized and
     existing under the laws of the United States of America with a rating, at
     the time as of which any investment therein is made, of "P-1" (or higher)
     according to Moody's or "A-1" (or higher) according to S&P;

          (iv) any money market deposit accounts issued or offered by a domestic
     commercial bank having capital and surplus in excess of $500.0 million;

          (v) marketable direct obligations issued by any state of the United
     States or any political subdivision of any such state or any public
     instrumentality thereof maturing within one year from the

                                       130


     date of acquisition thereof and, at the time of acquisition, having one of
     the two highest ratings obtainable from either S&P or Moody's;

          (vi) repurchase obligations with a term of not more than 31 days for
     underlying securities of the types described in clause (i) above entered
     into with any bank meeting the qualifications specified in clause (ii)
     above; and

          (vii) investments in money market funds which invest substantially all
     their assets in securities of the types described in clauses (i) through
     (vi) above.

     "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.

     "Unrestricted Subsidiary" means

     - any Subsidiary of Salem Holding that at the time of determination shall
       be an Unrestricted Subsidiary (as designated by the Board of Directors of
       Salem Holding, as provided below) and

     - any Subsidiary of an Unrestricted Subsidiary.

The Board of Directors of Salem Holding may designate any Subsidiary of Salem
Holding (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary if all of the following conditions apply:

     - such Subsidiary is not liable, directly or indirectly, with respect to
       any Indebtedness other than Unrestricted Subsidiary Indebtedness and

     - any Investment in such Subsidiary made as a result of designating such
       Subsidiary an Unrestricted Subsidiary shall not violate the provisions of
       the "-- Certain Covenants -- Limitation on Unrestricted Subsidiaries"
       covenant.

Any such designation by the Board of Directors of Salem Holding shall be
evidenced to the Trustee by filing with the Trustee a board resolution giving
effect to such designation and an officers' certificate certifying that such
designation complies with the foregoing conditions. The Board of Directors of
Salem Holding may designate any Unrestricted Subsidiary as a Restricted
Subsidiary; provided that immediately after giving effect to such designation,
Salem Holding could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the restrictions under the "-- Certain
Covenants -- Limitation on Indebtedness" covenant.

     "Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary means
Indebtedness of such Unrestricted Subsidiary

     - as to which neither Salem Holding nor any Restricted Subsidiary is
       directly or indirectly liable (by virtue of Salem Holding or any such
       Restricted Subsidiary being the primary obligor on, guarantor of, or
       otherwise liable in any respect to, such Indebtedness), except Guaranteed
       Debt of Salem Holding or any Restricted Subsidiary to any Affiliate, in
       which case (unless the incurrence of such Guaranteed Debt resulted in a
       Restricted Payment at the time of incurrence) Salem Holding shall be
       deemed to have made a Restricted Payment equal to the principal amount of
       any such Indebtedness to the extent guaranteed at the time such Affiliate
       is designated an Unrestricted Subsidiary and

     - which, upon the occurrence of a default with respect thereto, does not
       result in, or permit any holder of any Indebtedness of Salem Holding or
       any Restricted Subsidiary to declare, a default on such Indebtedness of
       Salem Holding or any Restricted Subsidiary or cause the payment thereof
       to be accelerated or payable prior to its Stated Maturity.

     "Voting Stock" means stock of the class or classes pursuant to which the
holders thereof have the general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation (irrespective of whether or not at the time stock of any other class
or classes shall have or might have voting power by reason of the happening of
any contingency).

     "Wholly Owned Restricted Subsidiary" means, with respect to any Person, a
Restricted Subsidiary of such Person all the Equity Interests of which are owned
by such Person or another Wholly Owned Restricted Subsidiary of such Person. As
of the date of the Indenture, the Wholly Owned Restricted Subsidiaries of Salem
Holding will consist of all of Salem Holding's Subsidiaries.
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                      EXCHANGE OFFER; REGISTRATION RIGHTS

     Salem Holding, the guarantors and the initial purchasers of the old notes
entered into a registration rights agreement dated as of June 25, 2001 (the
"Registration Rights Agreement") pursuant to which each of Salem Holding and the
guarantors have agreed that they will, at their expense, for the benefit of the
holders of the old notes (the "Holders"), use their best efforts to (i) within
75 days after the issue date of the old notes (the "Filing Date"), file a
registration statement on an appropriate registration form (the "Exchange Offer
Registration Statement") with respect to a registered offer (the "Exchange
Offer") to exchange the old notes for notes (the "Exchange Notes") of Salem
Holding, guaranteed on a senior subordinated basis by the guarantors, which
Exchange Notes will have terms substantially identical in all material respects
to the old notes (except that the Exchange Notes will not contain terms with
respect to transfer restrictions) and (ii) cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act within 145 days
after the Issue Date. Upon the Exchange Offer Registration Statement being
declared effective, Salem Holding will offer the Exchange Notes (and the related
guarantees) in exchange for surrender of the old notes. Salem Holding will keep
the Exchange Offer open for not less than 30 days (or longer if required by
applicable law) after the date notice of the Exchange Offer is mailed to the
Holders. For each of the old notes surrendered to Salem Holding pursuant to the
Exchange Offer, the Holder who surrendered such old note will receive an
Exchange Note having a principal amount equal to that of the surrendered old
note. Interest on each Exchange Note will accrue from the last date on which
interest was paid on the old note surrendered in exchange therefor, or if no
interest has been paid on such note, from June 25, 2001 (the "Issue Date").

     Under existing interpretations of the Commission contained in several
no-action letters to third parties, the Exchange Notes and the related
guarantees will be freely transferable by holders thereof (other than affiliates
of Salem Holding) after the Exchange Offer without further registration under
the Securities Act; provided, however, that each Holder that wishes to exchange
its old notes for Exchange Notes will be required to represent (i) that any
Exchange Notes to be received by it will be acquired in the ordinary course of
its business, (ii) that at the time of the commencement of the Exchange Offer it
has no arrangement or understanding with any person to participate in the
distribution (within the meaning of Securities Act) of the Exchange Notes in
violation of the Securities Act, (iii) that it is not an "affiliate" (as defined
in Rule 405 promulgated under Securities Act) of Salem Holding, (iv) if such
Holder is not a broker-dealer, that it is not engaged in, and does not intend to
engage in, the distribution of Exchange Notes and (v) if such Holder is a
broker-dealer (a "Participating Broker-Dealer") that will receive Exchange Notes
for its own account in exchange for old notes that were acquired as a result of
market-making or other trading activities, that it will deliver a prospectus in
connection with any resale of such Exchange Notes. Salem Holding will agree to
make available, during the period required by the Securities Act, a prospectus
meeting the requirements of the Securities Act for use by Participating
Broker-Dealers and other persons, if any, with similar prospectus delivery
requirements for use in connection with any resale of Exchange Notes.

     If (i) because of any change in law or in currently prevailing
interpretations of the staff of the Commission, Salem Holding is not permitted
to effect the Exchange Offer, (ii) the Exchange Offer is not consummated within
175 days of the Issue Date, (iii) in certain circumstances, certain holders of
unregistered Exchange Notes so request, or (iv) in the case of any Holder that
participates in the Exchange Offer, such Holder does not receive Exchange Notes
on the date of the exchange that may be sold without restriction under state and
federal securities laws (other than due solely to the status of such Holder as
an affiliate of Salem Holding within the meaning of the Securities Act), then in
each case, Salem Holding and the guarantors will (x) promptly, but in any event,
no later than five business days after any of the events listed in clauses (i)
through (iv) above, deliver to the Holders and the Trustee written notice
thereof (a "Shelf Notice") and (y) at Salem Holding's sole expense, (a) as
promptly as practicable, file a shelf registration statement covering resales of
the notes (the "Shelf Registration Statement"), (b) use their best efforts to
keep effective the Shelf Registration Statement until the earlier of two years
after the Issue Date or such time as all of the applicable notes have been sold
thereunder. Salem Holding will, in the event that a Shelf Registration Statement
is filed, provide to each Holder
                                       132


copies of the prospectus that is a part of the Shelf Registration Statement,
notify each such Holder when the Shelf Registration Statement for the notes has
become effective and take certain other actions as are required to permit
unrestricted resales of the notes. A Holder that sells notes pursuant to the
Shelf Registration Statement will be required to be named as a selling security
holder in the related prospectus and to deliver a prospectus to purchasers, will
be subject to certain of the civil liability provisions under Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement that are applicable to such a Holder (including
certain indemnification rights and obligations).

     If Salem Holding and the guarantors fail to meet the targets listed above,
then additional interest (the "Additional Interest") shall become payable in
respect of the old notes as follows:

          (i) if (A) neither the Exchange Offer Registration Statement nor the
     Shelf Registration Statement is filed with the Commission on or prior to 75
     days after the Issue Date or (B) notwithstanding that Salem Holding and the
     guarantors have consummated or will consummate the Exchange Offer, Salem
     Holding and the guarantors are required to file a Shelf Registration
     Statement and such Shelf Registration Statement is not filed on or prior to
     the date required by the Registration Rights Agreement, then commencing on
     the day after either such lapsed filing date, Additional Interest shall
     accrue on the principal amount of the notes at a rate of 0.50% per annum
     for the first 90 days immediately following each such filing date, such
     Additional Interest rate increasing by an additional 0.50% per annum at the
     beginning of each subsequent 90-day period; or

          (ii) if (A) neither the Exchange Offer Registration Statement nor a
     Shelf Registration Statement is declared effective by the Commission on or
     prior to 145 days after the Issue Date or (B) notwithstanding that Salem
     Holding and the guarantors have consummated or will consummate the Exchange
     Offer, Salem Holding and the guarantors are required to file a Shelf
     Registration Statement and such Shelf Registration Statement is not
     declared effective by the Commission on or prior to the date required by
     the Registration Rights Agreement, then, commencing on the day after either
     such required effective date, Additional Interest shall accrue on the
     principal amount of the notes at a rate of 0.50% per annum for the first 90
     days immediately following such date, such Additional Interest rate
     increasing by an additional 0.50% per annum at the beginning of each
     subsequent 90-day period; or

          (iii) if (A) Salem Holding and the guarantors have not exchanged
     Exchange Notes for all notes validly tendered in accordance with the terms
     of the Exchange Offer on or prior to 175 days after the Issue Date or (B)
     if applicable, the Shelf Registration Statement has been declared effective
     and such Shelf Registration Statement ceases to be effective at any time
     prior to the second anniversary of the Issue Date (other than after such
     time as all notes have been disposed of thereunder), then Additional
     Interest shall accrue on the principal amount of the notes at a rate of
     0.50% per annum for the first 90 days commencing on (x) the 176th day after
     the Issue Date, in the case of (A) above, or (y) the day such Shelf
     Registration Statement ceases to be effective, in the case of (B) above,
     such Additional Interest rate increasing by an additional 0.50% per annum
     at the beginning of each subsequent 90-day period;

provided, however, that the Additional Interest rate on the notes may not accrue
under more than one of the foregoing clauses (i) -- (iii) at any one time and at
no time shall the aggregate amount of Additional Interest accruing exceed in the
aggregate 2.0% per annum; provided, further, however, that (1) upon the filing
of the Exchange Offer Registration Statement or a Shelf Registration Statement
(in the case of clause (i) above), (2) upon the effectiveness of the Exchange
Offer Registration Statement or a Shelf Registration Statement (in the case of
clause (ii) above), or (3) upon the exchange of Exchange Notes for all notes
tendered (in the case of clause (iii)(A) above), or upon the effectiveness of
the Shelf Registration Statement which had ceased to remain effective (in the
case of clause (iii)(B) above), Additional Interest on the notes as a result of
such clause (or the relevant subclause thereof), as the case may be, shall cease
to accrue.

     Any amounts of Additional Interest due pursuant to clause (i), (ii) or
(iii) above will be payable in cash on the same original interest payment dates
as the old notes.

                                       133


                         BOOK-ENTRY; DELIVERY AND FORM

     The exchange notes will initially be represented by one or more global
notes in fully registered form without interest coupons (each a "Global Note")
and will be deposited with the Trustee as a custodian for The Depository Trust
Company ("DTC") and registered in the name of a nominee of such depository.

THE GLOBAL NOTES

     The descriptions of the operations and procedures of DTC set forth below
are provided solely as a matter of convenience. These operations and procedures
are solely within the control of DTC and are subject to change by DTC from time
to time. Neither we nor any of the initial purchasers takes any responsibility
for these operations or procedures, and we urge you to contact DTC or persons
who have accounts with DTC ("participants") directly to discuss these matters.

     We expect that pursuant to procedures established by DTC (i) upon the
issuance of the Global Notes, DTC or its custodian will credit, on its internal
system, the principal amount at maturity of the individual beneficial interests
represented by such Global Notes to the respective accounts of persons who have
accounts with such depositary and (ii) ownership of beneficial interests in the
Global Notes will be shown on, and the transfer of such ownership will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants). Holders may hold their interests
in the Global Notes directly through DTC if they are participants in such
system, or indirectly through organizations that are participants in such
system.

     So long as DTC, or its nominee, is the registered owner or holder of the
exchange notes, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the exchange notes represented by such Global Notes for
all purposes under the indenture. No beneficial owner of an interest in the
Global Notes will be able to transfer that interest except in accordance with
DTC's procedures, in addition to those provided for under the indenture with
respect to the exchange notes.

     Payments of the principal of, premium (if any), and interest (including
Additional Interest) on the Global Notes will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of Salem Holding, the
guarantors, the Trustee or any paying agent will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Notes or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interest.

     Salem Holding expects that DTC or its nominee, upon receipt of any payment
of principal, premium, if any, or interest (including Additional Interest) on
the Global Notes, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the Global Notes as shown on the records of DTC or its nominee. Salem Holding
also expects that payments by participants to owners of beneficial interests in
the Global Notes held through such participants will be governed by standing
instructions and customary practice, as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.

     Salem Holding expects that transfers between participants in DTC will be
effected in the ordinary way through DTC's same-day funds system in accordance
with DTC rules and will be settled in same day funds.

     DTC has advised Salem Holding that it will take any action permitted to be
taken by a holder of exchange notes (including the presentation of exchange
notes for exchange as described below) only at the direction of one or more
participants to whose account the DTC interests in the Global Notes are credited
and only in respect of such portion of the aggregate principal amount of
exchange notes as to which such participant or participants has or have given
such direction. However, if there is an event of default under

                                       134


the indenture, DTC will exchange the Global Notes for certificated securities,
which it will distribute to its participants.

     DTC has advised Salem Holding as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants"). The rules applicable to DTC and its direct and
indirect participants are on file with the Commission.

     Although DTC has agreed to certain procedures in order to facilitate
transfers of interests in the Global Notes among participants of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. None of Salem Holding, the initial purchasers or the
Trustee will have any responsibility for the performance by DTC or its
respective participants or indirect participants of their obligations under the
rules and procedures governing their operations.

     The information in this section concerning the DTC and DTC's book-entry
system has been obtained from sources that we believe to be reliable, but we
take no responsibility for the accuracy thereof.

CERTIFICATED SECURITIES

     Certificated Securities shall be issued in exchange for beneficial
interests in the Global Notes (i) if Salem Holding so determines, (ii) if DTC
ceases to be registered as a clearing agency under the Exchange Act or is at any
time unwilling or unable to continue as a depositary for the Global Notes or
(iii) an event of default occurs under the indenture and such event of default
or event continues for a period of 90 days. Neither Salem Holding nor the
Trustee shall be liable for any delay by DTC or any participant or indirect
participant in identifying the owners of security entitlements in the related
exchange notes and Salem Holding and the Trustee may conclusively rely on, and
shall be protected in relying on, instructions from DTC for all purposes
(including with respect to the registration and delivery, and the respective
principal amounts, of the exchange notes to be issued).

REGISTRAR AND PAYING AGENT

     The Trustee will act initially as the registrar and paying agent for the
exchange notes. The Trustee, in its capacity as the paying agent, may appoint
co-paying agents, which must be acceptable to Salem Holding.

     Registration of transfers or exchanges of the exchange notes will be
effected without charge by or on behalf of Salem Holding, but any holder
transferring any interest in an exchange note will be required to pay to the
Trustee or Salem Holding, as appropriate, any tax or other governmental charges
that may be imposed in connection with that transfer or exchange. Salem Holding
will not be required to register or cause to be registered the transfer of any
exchange note after it has been called for redemption.

                                       135


                CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS

     The following is a summary of certain United States federal tax
consequences associated with the exchange of old notes for exchange notes and of
the ownership and disposition of the exchange notes by an initial beneficial
owner of the exchange notes. This summary is based on the Internal Revenue Code
of 1986, as amended (the "Code"), regulations issued thereunder, judicial
authority and administrative rulings and practice, all as of the date thereof
and all of which are subject to change. Any such change may be applied
retroactively and may adversely affect the federal tax consequences described
herein. The tax treatment of the holders of the exchange notes may vary
depending upon their particular situations. This summary does not discuss all of
the tax consequences that may be relevant to particular investors or to
investors subject to special treatment under the U.S. federal income tax laws
(such as insurance companies, brokers, financial institutions, tax-exempt
organizations, retirement plans, regulated investment companies, brokers,
securities dealers, or expatriates). In addition, except as otherwise indicated,
the summary does not consider the effect of any applicable foreign, state, local
or other tax laws or estate or gift tax consequences. We will not seek a ruling
from the Internal Revenue Service (the "IRS") with respect to any of the matters
discussed in this prospectus and there can be no assurance that the IRS will not
challenge one or more of the tax consequences described below. PROSPECTIVE
INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE U.S. FEDERAL TAX
CONSEQUENCES OF THE EXCHANGE AND OF ACQUIRING, HOLDING AND DISPOSING OF EXCHANGE
NOTES, AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY
FOREIGN, STATE, LOCAL OR OTHER TAXING JURISDICTION AND THE POSSIBLE EFFECTS ON
YOU OF CHANGES IN U.S. FEDERAL OR OTHER TAX LAWS.

     For purposes of this discussion, a United States person means:

     - an individual who is a citizen of the United States or a resident of the
       United States, as determined for U.S. federal income tax purposes;

     - a corporation, partnership or other business entity created or organized
       in or under the laws of the United States or any State or political
       subdivision thereof or therein, including the District of Columbia (other
       than a partnership that is not treated as a United States person under
       any applicable treasury regulations);

     - an estate the income of which is subject to U.S. federal income taxation
       regardless of its source; or

     - a trust with respect to which a court within the United States is able to
       exercise primary supervision over its administration, and one or more
       United States persons have the authority to control all of its
       substantial decisions or certain electing trusts that were in existence
       on August 19, 1996, and were treated as domestic trusts on that date.

     An individual may, subject to certain exceptions, be deemed to be a
resident of the United States by reason of being present in the United States
for at least 31 days in the calendar year and for an aggregate of at least 183
days during a three-year period ending in the current calendar year (counting
for such purposes all of the days present in the current year, one-third of the
days present in the immediately preceding year, and one-sixth of the days
present in the second preceding year).

  TREATMENT OF THE EXCHANGE OFFER

     The exchange of old notes for exchange notes pursuant to this exchange
offer should not be treated as an "exchange" for U.S. federal income tax
purposes because the exchange notes will not be considered to differ materially
in kind or extent from the old notes. Rather, any exchange notes received by you
should be treated as a continuation of your investment in the old notes. As a
result, there should be no U.S. federal income tax consequences to you resulting
from the exchange offer. In addition, you should

                                       136


have the same adjusted issue price, adjusted basis, and holding period in the
exchange notes as you had in the old notes immediately prior to the exchange.
Accordingly,

     - no gain or loss will be realized by a holder upon receipt of an exchange
       note;

     - the holding period of the exchange note will include the holding period
       of the old notes exchanged therefor; and

     - the adjusted tax basis of the exchange notes will be the same as the
       adjusted tax basis of the old notes exchanged at the time of the
       exchange.

FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS

  TREATMENT OF DISPOSITIONS OF EXCHANGE NOTES

     The following is a general discussion of certain U.S. federal income tax
consequences of the disposition of the exchange notes by a holder that is a
United States person (a "U.S. Holder").

     Upon the sale, exchange, retirement or other taxable disposition of an
exchange note, a U.S. Holder will recognize gain or loss equal to the difference
between the amount realized on such sale, exchange, retirement or disposition
(other than amounts in respect of accrued and unpaid interest, which will be
taxable as such) and the U.S. Holder's adjusted tax basis in the note. A U.S.
Holder's adjusted tax basis in an exchange note will be, as discussed above, the
same as the adjusted tax basis of the old notes exchanged at the time of the
exchange. Such gain or loss generally will be capital gain or loss and will be
long-term capital gain or loss if, at the time of such sale, exchange,
retirement or disposition, the exchange note had been held by such U.S. Holder
for more than one year (taking into account the holding period of the old
notes). Long term capital gain recognized by an individual U.S. Holder is
generally subject to a maximum U.S. federal rate of 20%.

  INFORMATION REPORTING AND BACKUP WITHHOLDING

     Parent or Salem Holding will, when required to, report to the U.S. Holders
of the exchange notes and the IRS amounts paid on or with respect to the
exchange notes during each calendar year and the amount of tax, if any, withheld
from such payments. Certain non-corporate U.S. Holders may be subject to backup
withholding (i) at a rate of 31% on payments made before August 7, 2001, or
after calendar year 2010 and (ii) at the fourth-lowest rate of tax applicable to
an unmarried individual United States person on payments made with respect to
the exchange notes for any other period (30.5% in 2001, 30% in 2002 and 2003,
29% in 2004 and 2005, and 28% in 2006 through 2010). In general, backup
withholding will apply to a U.S. Holder if the U.S. Holder:

     - fails to furnish its Taxpayer Identification Number ("TIN"), which for an
       individual would be his or her Social Security Number;

     - furnishes an incorrect TIN;

     - is notified by the IRS that it has failed to properly report payments of
       interest and dividends; or

     - under certain circumstances, fails to certify, under penalties of
       perjury, that it has furnished a correct TIN and has not been notified by
       the IRS that it is subject to backup withholding for failure to report
       interest and dividend payments.

     A U.S. Holder will be eligible for an exemption from withholding by
providing a properly completed IRS Form W-9 to us or our paying agent.

     Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such U.S. Holder's U.S. federal income tax
liability provided that the required information is furnished to the IRS.
                                       137


FEDERAL TAX CONSEQUENCES TO NON-U.S. HOLDERS

     The following is a general discussion of the U.S. federal income and estate
tax consequences of the ownership and disposition of the exchange notes by a
holder that is not a U.S. Holder (a "Non-U.S. Holder"). For purposes of the
following discussion, interest and gain on the sale, exchange or other
disposition of the exchange notes will be considered "U.S. trade or business
income" if such income or gain is (i) effectively connected with the conduct of
a trade or business in the United States and (ii) in the case of a resident
under an applicable income tax treaty, attributable to a permanent establishment
in the United States.

  TREATMENT OF INTEREST

     A Non-U.S. Holder will not be subject to U.S. federal income or withholding
tax in respect of interest income on the exchange notes if the interest
qualifies for the so-called "portfolio interest exemption." This will be the
case if each of the following requirements is satisfied:

     - The interest is not U.S. trade or business income.

     - The Non-U.S. Holder provides to us or our paying agent the appropriate
       certification.

     - The Non-U.S. Holder does not actually or constructively own 10% or more
       of the voting power of our stock.

     - The Non-U.S. Holder is not (i) a controlled foreign corporation for U.S.
       federal income tax purposes that is actually or constructively related to
       us, (ii) a bank which acquired the note in consideration for an extension
       of credit made pursuant to a loan agreement entered into in the ordinary
       course of business, or (iii) a foreign tax exempt organization or a
       private foundation for U.S. federal income tax purposes.

     The certification requirement can be satisfied as follows:

     - If the Non-U.S. Holder provides to us or our paying agent a statement on
       IRS Form W-8BEN (or suitable substitute form), together with all
       appropriate attachments, signed under penalties of perjury, identifying
       the Non-U.S. Holder and stating, among other things, that the Non-U.S.
       Holder is not a United States person.

     - If an exchange note is held through a securities clearing organization,
       bank or another financial institution that holds customers' securities in
       the ordinary course of its trade or business, (i) the Non-U.S. Holder
       provides IRS Form W-8BEN (or suitable substitute form) to the
       organization or institution, and (ii) the organization or institution,
       under penalties of perjury, certifies to us that it has received such
       statement from the beneficial owner or another intermediary and furnishes
       us or our paying agent with a copy.

     Alternative documentation procedures may also be available for satisfying
the certification requirement described above. For instance, under one such
option, a withholding agent would be allowed to rely on an IRS Form W-8IMY, or
suitable substitute or successor form, furnished by a financial institution or
other intermediary on behalf of one or more beneficial owners or other
intermediaries without having to obtain the beneficial owner certificate
described in the preceding paragraph, provided that the financial institution or
intermediary has entered into a withholding agreement with the IRS and thus is a
qualified intermediary. Under another option, an authorized foreign agent of a
U.S. withholding agent would be permitted to act on behalf of the U.S.
withholding agent, provided specified conditions are met. With respect to the
certification requirement for exchange notes that are held by a foreign
partnership, the final regulations provide that unless the foreign partnership
has entered into a withholding agreement with the IRS, the foreign partnership
will be required, in addition to providing an intermediary Form W-8IMY, to
attach an appropriate certification by each partner. Prospective investors,
including foreign partnerships and their partners, should consult their tax
advisors regarding possible additional reporting requirements.
                                       138


     If the portfolio interest exemption is not satisfied, a 30% withholding tax
will apply to interest income on the exchange notes paid to such Non-U.S.
Holder, unless one of the following two exceptions is satisfied. The first
exception is that an applicable income tax treaty reduces or eliminates such
tax, and a Non-U.S. Holder claiming such benefit of that treaty provides to us
or our paying agent a properly executed IRS Form W-8BEN (or suitable substitute
form). The second exception is that the interest is U.S. trade or business
income and the Non-U.S. Holder provides an appropriate statement to that effect
on an IRS Form W-8ECI (or suitable substitute form). In the latter case, such
Non-U.S. Holder generally will be subject to U.S. federal income tax with
respect to all income from the exchange notes in the same manner as U.S.
Holders, as described above. Additionally, in such event, Non-U.S. Holders that
are corporations could be subject to a branch profits tax on such income at a
rate of 30% (or at a reduced rate under an applicable tax treaty).

  TREATMENT OF DISPOSITIONS OF EXCHANGE NOTES

     Generally, a Non-U.S. Holder will not be subject to U.S. federal income tax
on gain realized upon the sale, exchange, retirement or other disposition of an
exchange note unless (i) such holder is an individual present in the United
States for 183 days or more in the taxable year of the sale, exchange,
retirement or other disposition and certain other conditions are met, or (ii)
the gain is U.S. trade or business income. If the first exception applies, the
Non-U.S. Holder will be subject to tax at a rate of 30% on the amount by which
capital gains allocable to U.S. sources (including gains from the sale,
exchange, retirement or other disposition of the exchange note) exceed capital
losses allocable to U.S. sources. If the second exception applies, generally
Non-U.S. Holders will be subject to U.S. federal income tax with respect to such
gain in the same manner as U.S. Holders, as described above. Additionally, in
such event, Non-U.S. Holders that are corporations could be subject to a branch
profits tax on such income.

  TREATMENT OF EXCHANGE NOTES FOR U.S. FEDERAL ESTATE TAX PURPOSES

     Subject to applicable estate tax treaty provisions, an exchange note held
by an individual Non-U.S. Holder at the time of his or her death generally will
not be subject to U.S. federal estate tax, provided, among other requirements,
that such individual Non-U.S. Holder does not at the time of death actually or
constructively own 10% or more of the combined voting power of all classes of
our stock and payments of interest on such exchange notes would not have been
considered U.S. trade or business income.

     Recently enacted U.S. federal legislation provides for reductions in U.S.
federal estate tax through 2009 and the elimination of such tax entirely in
2010. Under the legislation, U.S. federal estate tax would be fully reinstated,
as in effect prior to the reductions, in 2011.

  INFORMATION REPORTING AND BACKUP WITHHOLDING

     Parent or Salem Holding will, when required, report to the IRS and to each
Non-U.S. Holder the amount of any interest paid on the exchange notes in each
calendar year, and the amount of tax withheld, if any, with respect to the
payments. Copies of the information returns reporting such interest and
withholding also may be made available to the tax authorities in the country in
which a Non-U.S. Holder is a resident under the provisions of an applicable
income tax treaty or agreement.

     Treasury Regulations provide that backup withholding at the rate described
above under "-- Federal Income Tax Consequences to U.S. Holders -- Information
Reporting and Backup Withholding" and additional information reporting will not
apply to payments on the exchange notes by us to a Non-U.S. Holder if the holder
certifies as to its status as a Non-U.S. Holder under penalties of perjury or
otherwise establishes an exemption, provided that neither Parent, Salem Holding
or our paying agent has actual knowledge that the holder is a United States
person or that the conditions of any other exemption are not, in fact,
satisfied.

                                       139


     Information reporting and backup withholding requirements with respect to
the payment of the proceeds from the disposition of the exchange notes by a
Non-U.S. Holder are as follows:

     - If the proceeds are paid to or through the United States office of a
       broker, they generally will be subject to information reporting and
       backup withholding. However, no such reporting and withholding is
       required if: (i) the holder either certifies as to its status as a
       Non-U.S. Holder under penalties of perjury on an IRS Form W-8BEN, or a
       suitable substitute form, or otherwise establishes an exemption; and (ii)
       the broker does not have actual knowledge that the holder is a United
       States person or that the conditions of any other exemption are not, in
       fact, satisfied.

     - If the proceeds are paid to or through a non-United States office of a
       broker that is not a United States person or a "United States related
       person," as defined below, they will not be subject to backup withholding
       or information reporting.

     - If the proceeds are paid to or through a non-United States office of a
       broker that is either a United States person or a United States related
       person, they generally will be subject to information reporting. However,
       no such reporting is required if (i) the holder certifies as to its
       status as a Non-U.S. Holder under penalties of perjury or the broker has
       certain documentary evidence in its files as to the Non-U.S. Holder's
       foreign status, and (ii) the broker has no actual knowledge to the
       contrary. Backup withholding will generally not apply to payments of the
       proceeds made through a non-United States office of a United States
       person or United States related person.

     For purposes of this paragraph, a "United States related person" is:

     - a controlled foreign corporation for U.S. federal income tax purposes;

     - a foreign person 50% or more of whose gross income from all sources for
       the three-year period ending with the close of its taxable year preceding
       the payment, or, if shorter, for such part of the period that it has been
       in existence, is U.S. trade or business income; or

     - a foreign partnership if at any time during its tax year one or more of
       its partners are United States persons who, in the aggregate, hold more
       than 50% of the income or capital interest of the partnership or if, at
       any time during its taxable year, the partnership is engaged in the
       conduct of a U.S. trade or business.

     Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's U.S. federal income tax liability provided that the requisite
procedures are followed.

     THE U.S. FEDERAL TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF THE EXCHANGE NOTES,
INCLUDING THE TAX CONSEQUENCES UNDER U.S. FEDERAL, STATE AND LOCAL AND NON-U.S.
TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN SUCH TAX LAWS.

                                       140


                              PLAN OF DISTRIBUTION

     Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange notes received in
exchange for outstanding old notes where such outstanding exchange notes were
acquired as a result of market-making activities or other trading activities. We
have agreed that, for a period of one year after the exchange offer expiration
date, we will make this prospectus, as amended or supplemented, available to any
participating broker-dealer for use in connection with any such resale.

     Salem Holding will not receive any proceeds from any sale of exchange notes
by broker-dealers. Exchange notes received by broker-dealers for their own
account pursuant to the exchange offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the exchange notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchases or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such exchange notes. Any broker-dealer
that resells exchange notes that were received by it for its own account
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of such exchange notes may be deemed to be an "underwriter" within
the meaning of the Securities Act, and any profit on any such resale of exchange
notes and any commissions or concessions received by such persons may be deemed
to be underwriting compensation under the Securities Act. The letter of
transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.

     Salem Holding will promptly send additional copies of this prospectus and
any amendment or supplement to this prospectus to any broker-dealer that
requests such documents in the letter of transmittal. Salem Holding has agreed
to pay all expenses incident to the exchange offer other than commissions or
concessions of any brokers or dealers and will indemnify original holders of the
outstanding exchange notes, including any broker-dealers, against certain
liabilities, including certain liabilities under the Securities Act.

     Salem Holding has not entered into any arrangements or understandings with
any person to distribute the exchange notes to be received in the exchange
offer.

                                 LEGAL MATTERS

     Certain legal matters with regard to the validity of the exchange notes
will be passed upon for us by Gibson, Dunn & Crutcher LLP, Irvine, California.

                                    EXPERTS

     The consolidated financial statements of Parent at December 31, 1999 and
2000 and for each of the three years in the period ended December 31, 2000
appearing in this prospectus and registration statement, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
also appearing elsewhere herein. Such consolidated financial statements have
been included herein in reliance upon such reports given on the authority of
such firm as experts in accounting and auditing.

     The combined financial statements of Clear Channel Communications, Inc.'s
radio stations KXMX-FM and KEZY-AM as of June 30, 2000 and the twelve months
then ended appearing in Parent's Form 8-K/A filed October 16, 2001 have been
audited by Ernst & Young LLP, independent auditors,

                                       141


as set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.

     The statement of assets acquired as of August 24, 2000 and the related
statements of revenues and direct operating expenses of WBOB-AM for each of the
two years in the period ended December 31, 1999 incorporated in this prospectus
by reference to Parent's Current Report on Form 8-K/A filed October 16, 2001
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.

     The financial statements of WRMR-AM as of and for the year ended June 30,
2000 incorporated in this prospectus by reference to Parent's Current Report on
Form 8-K/A filed October 16, 2001, have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.

     The financial statements of WKNR-AM as of June 30, 2000 and for the period
from July 13, 1999 to June 30, 2000 incorporated in this prospectus by reference
to Parent's Current Report on Form 8-K/A filed October 16, 2001, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

     The consolidated financial statements of Sunburst Dallas, LP as of and for
the year ended June 30, 2000, incorporated in this prospectus by reference from
Parent's Current Report on Form 8-K/A filed October 16, 2001, have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report, which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.

              AVAILABLE INFORMATION AND INCORPORATION BY REFERENCE

     Parent is subject to the informational and reporting requirements of the
Exchange Act and in accordance therewith is required to file periodic reports,
proxy statements and other information with the Commission. You may read and
copy, at prescribed rates, any document Parent files with the Commission at the
following Commission public reference rooms:

                                                          
       Judiciary Plaza             500 West Madison Street               233 Broadway
    450 Fifth Street, N.W.                14th Floor                      16th Floor
          Room 1024                   Chicago, IL 60661               Woolworth Building
    Washington, D.C. 20549                                            New York, NY 10279



     You may obtain information on the operation of the public reference room in
Washington, D.C. by calling the Commission at 1-800-SEC-0330.

     Parent also files information electronically with the Commission. These
electronic filings are available from the Commission's Internet site at
http://www.sec.gov, which contains reports, proxy and information statements and
other information regarding issuers that file electronically.

     To request a copy of any or all of these documents, you should write or
telephone us at our principal executive office at the following address and
telephone number:

                        Salem Communications Corporation
                              4880 Santa Rosa Road
                                   Suite 300
                              Camarillo, CA 93012
                                 (805) 987-0400
                              Attention: Secretary

                                       142


     Salem Holding is not currently subject to the informational reporting
requirements of the Exchange Act. Although Salem Holding will become subject to
such requirements upon the effectiveness of the registration statement of which
this prospectus forms a part, it is not expected that Salem Holding will be
required to file separate reports under the Exchange Act, in reliance upon the
exemption from such requirements under Rule 3-10 of Regulation S-X promulgated
by the Commission under the Exchange Act. Such exemption is based on Salem
Holding and all other co-registrants (other than Parent) being wholly-owned by
Parent, either directly or through wholly-owned subsidiaries of Parent, Parent's
filing of regular reports with the Commission, and Parent and each of its
subsidiaries (other than Salem Holding) providing full and unconditional, joint
and several, guarantees of Salem Holding's obligations and the rights of holders
of the old notes and the exchange notes.

     Salem Holding has agreed that, whether or not it is required to do so by
the rules and regulations of the Commission, for so long as any of the old notes
or the exchange notes remain outstanding, it will furnish to the holders of the
old notes and the exchange notes and (if permitted) file with the Commission,
copies of financial and other information that would be contained in the annual
and quarterly reports that it would be required to file with the Commission if
it were subject to such requirements under the Exchange Act. Salem Holding will
be deemed to have satisfied such requirements if Parent files and provides
reports, documents and information of the types otherwise so required within the
applicable time periods and Salem Holding is not required to file such reports,
documents and information separately under the applicable rules and regulations
of the Commission (after giving effect to any exemptive relief) because of the
filings by Parent as long as Parent's quarterly and annual reports contain
separate audited consolidated financial statements for Salem Holding and its
Subsidiaries or consolidating financial information which includes separate
condensed consolidated financial information of Salem Holding and its
Subsidiaries. In addition, Salem Holding has agreed to furnish to holders of the
old notes and the exchange notes, and to prospective purchasers of the notes,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act during any period in which it is not subject
to the informational and reporting requirements of the Exchange Act.

     This prospectus hereby incorporates by reference the following documents
previously filed with the Commission:

     - Parent's Current Report on Form 8-K/A filed November 7, 2000 as amended
       by Parent's Current Report on Form 8-K/A filed October 16, 2001.

     All documents that we file pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this prospectus and prior to the expiration
date of the exchange offer will be deemed to be incorporated by reference into
this prospectus and to be part of this prospectus from their date of filing.

     Any statement contained in a document incorporated by reference in this
prospectus will be deemed to be modified or superseded for the purposes of this
prospectus to the extent that a statement contained in this prospectus or in any
other subsequently filed document that also is incorporated in this prospectus
modifies or replaces such statement. Any statement so modified or superseded
will not be deemed, except as so modified or superseded, to constitute a part of
this prospectus. We will provide without charge to each person to whom a copy of
this prospectus has been delivered, or who makes a written or oral request, a
copy of any and all of the documents incorporated by reference in this
prospectus (other than exhibits, unless such exhibits are specifically
incorporated by reference into such documents). Requests should be submitted in
writing or by telephone to us at the above address or telephone number.

                                       143


                         INDEX TO FINANCIAL STATEMENTS



                                                                 PAGE
                                                                 ----
                                                           
CONSOLIDATED FINANCIAL STATEMENTS OF SALEM COMMUNICATIONS
  CORPORATION
Report of Ernst & Young LLP, Independent Auditors...........      F-2
Consolidated Balance Sheets as of December 31, 1999 and 2000
  and June 30, 2001 (unaudited).............................      F-3
Consolidated Statements of Operations for the years ended
  December 31, 1998, 1999 and 2000 and the six months ended
  June 30, 2000 and 2001 (unaudited)........................      F-4
Consolidated Statements of Stockholders' Equity for the
  years ended December 31, 1998, 1999 and 2000 and the six
  months ended June 30, 2001 (unaudited)....................      F-5
Consolidated Statements of Cash Flows for the years ended
  December 31, 1998, 1999 and 2000 and the six months ended
  June 30, 2000 and 2001 (unaudited)........................      F-6
Notes to Consolidated Financial Statements..................      F-7


                                       F-1


               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
of Salem Communications Corporation

     We have audited the accompanying consolidated balance sheets of Salem
Communications Corporation (the "Company") as of December 31, 1999 and 2000, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 2000.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Salem
Communications Corporation at December 31, 1999 and 2000, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States.

                                          ERNST & YOUNG LLP

Woodland Hills, California
March 5, 2001

                                       F-2


                        SALEM COMMUNICATIONS CORPORATION

                          CONSOLIDATED BALANCE SHEETS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



                                                                  DECEMBER 31,
                                                              --------------------     JUNE 30,
                                                                1999        2000         2001
                                                              --------    --------    -----------
                                                                                      (UNAUDITED)
                                                                             
                                      ASSETS

Current assets:
  Cash and cash equivalents.................................  $ 34,124    $  3,928     $ 54,079
  Accounts receivable (less allowance for doubtful accounts
     of $1,753 in 1999, $3,550 in 2000 and $2,458 and $4,085
     in June 30, 2000 and 2001, respectively)...............    17,481      25,129       24,779
  Other receivables.........................................       645       1,230          984
  Prepaid expenses..........................................     1,628       1,558        1,839
  Due from stockholders.....................................       905         450          450
  Deferred income taxes.....................................       732       2,250          658
                                                              --------    --------     --------
Total current assets........................................    55,515      34,545       82,789
Property, plant, equipment and software, net................    50,665      69,004       78,765
Intangible assets:
  Broadcast licenses........................................   177,487     397,137      344,327
  Noncompetition agreements.................................    14,625      12,618       12,618
  Customer lists and contracts..............................     4,097       3,301        7,176
  Favorable and assigned leases.............................     1,800       1,800        1,800
  Goodwill..................................................    15,177      16,739       17,217
  Other intangible assets...................................     4,799       4,899        4,898
                                                              --------    --------     --------
                                                               217,985     436,494      388,036
  Less accumulated amortization.............................    67,465      78,012       87,396
                                                              --------    --------     --------
Intangible assets, net......................................   150,520     358,482      300,640
Bond issue costs............................................     2,750       2,396        7,314
Other assets................................................     4,914       6,241        7,537
                                                              --------    --------     --------
          Total assets......................................  $264,364    $470,668     $477,045
                                                              ========    ========     ========

                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $  2,600    $  4,786     $  5,040
  Accrued expenses..........................................       825       1,245        1,426
  Accrued compensation and related..........................     2,478       3,361        4,075
  Accrued interest..........................................     2,546       3,299        2,999
  Deferred subscription revenue.............................     1,670       1,509        1,418
  Income taxes..............................................       148         300          110
  Current portion of long-term debt and capital lease
     obligations............................................     3,248          93          670
                                                              --------    --------     --------
Total current liabilities...................................    13,515      14,593       15,738
Long-term debt, less current portion........................   100,087     286,050      302,967
Deferred income taxes.......................................     7,232      15,279       10,111
Other liabilities...........................................       691       1,798        1,290
Stockholders' equity:
  Class A common stock, $.01 par value; authorized
     80,000,000 shares; issued and outstanding 17,902,392
     shares.................................................       179         179          179
  Class B common stock, $.01 par value; authorized
     20,000,000 shares; issued and outstanding 5,553,696
     shares.................................................        56          56           56
  Additional paid-in capital................................   147,380     147,380      147,380
  Retained earnings (deficit)...............................    (4,776)      5,333         (676)
                                                              --------    --------     --------
          Total stockholders' equity........................   142,839     152,948      146,939
                                                              --------    --------     --------
          Total liabilities and stockholders' equity........  $264,364    $470,668     $477,045
                                                              ========    ========     ========


                            See accompanying notes.
                                       F-3


                        SALEM COMMUNICATIONS CORPORATION

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



                                                                                              SIX MONTHS ENDED
                                                          YEAR ENDED DECEMBER 31,                 JUNE 30,
                                                    ------------------------------------   -----------------------
                                                       1998         1999         2000         2000         2001
                                                    ----------   ----------   ----------   ----------   ----------
                                                                                                 (UNAUDITED)
                                                                                         
Gross broadcasting revenue........................  $   85,411   $   95,277   $  120,123   $   51,762   $   69,919
Less agency commissions...........................       7,520        8,155       10,026        4,335        5,944
                                                    ----------   ----------   ----------   ----------   ----------
Net broadcasting revenue..........................      77,891       87,122      110,097       47,427       63,975
Other media revenue...............................          --        6,424        7,916        3,797        4,068
                                                    ----------   ----------   ----------   ----------   ----------
Total revenue.....................................      77,891       93,546      118,013       51,224       68,043
Operating expenses:
  Broadcasting operating expenses (including
    $1,224, $1,491, and $1,449 in the years ended
    December 31, 1998, 1999 and 2000,
    respectively, and $682 and $575 for the six
    months ended June 30, 2000 and 2001,
    respectively, paid to related parties)........      42,526       46,291       60,714       26,211       41,091
  Other media operating expenses..................          --        9,985       14,863        8,115        5,016
  Corporate expenses (including $69, $156, and
    $149 in the years ended December 31, 1998,
    1999, and 2000, respectively, and $62 and $107
    for the six months ended June 30, 2000 and
    2001, respectively, paid to related
    parties)......................................       7,395        8,507       10,457        5,272        7,235
  Stock and related cash grant....................          --        2,550           --           --           --
  Depreciation (including $1,817 and $1,344 in
    years ended December 31, 1999 and 2000,
    respectively and $648 and $430 for the six
    months ended June 30, 2000 and 2001,
    respectively, for other media businesses).....       4,305        6,599        7,087        3,306        3,640
  Amortization (including $420 and $1,146 in years
    ended December 31, 1999 and 2000, respectively
    and $591 and $521 for the six months ended
    June 30, 2000 and 2001, respectively, for
    other media businesses).......................       9,753       11,634       18,392        7,032       11,593
                                                    ----------   ----------   ----------   ----------   ----------
  Total operating expenses........................      63,979       85,566      111,513       49,936       68,575
                                                    ----------   ----------   ----------   ----------   ----------
Net operating income (loss).......................      13,912        7,980        6,500        1,288         (532)
Other income (expense):
  Interest income.................................         291        1,005          534          351        1,554
  Gain (loss) on sale of assets...................         236         (219)         773        4,408        2,518
  Gain on sale of assets to related party.........          --           --       28,794           --           --
  Interest expense................................     (15,941)     (14,219)     (17,452)      (5,219)     (12,749)
  Other expense...................................        (422)        (633)        (857)        (420)        (162)
                                                    ----------   ----------   ----------   ----------   ----------
Income (loss) before income taxes and
  extraordinary item..............................      (1,924)      (6,086)      18,292          408       (9,371)
Provision (benefit) for income taxes..............        (343)      (1,611)       6,996          464       (3,362)
                                                    ----------   ----------   ----------   ----------   ----------
Income (loss) before extraordinary item...........      (1,581)      (4,475)      11,296          (56)      (6,009)
Extraordinary loss on early extinguishment of debt
  (net of income tax benefit of $1,986 and $662 in
  years ended December 31, 1999 and 2000,
  respectively)...................................          --       (3,570)      (1,187)          --           --
                                                    ----------   ----------   ----------   ----------   ----------
Net income (loss).................................  $   (1,581)  $   (8,045)  $   10,109   $      (56)  $   (6,009)
                                                    ==========   ==========   ==========   ==========   ==========
Basic and diluted earnings (loss) per share before
  extraordinary item..............................  $    (0.09)  $    (0.22)  $     0.48   $    (0.00)  $    (0.26)
Extraordinary loss per share......................          --        (0.18)       (0.05)          --           --
                                                    ----------   ----------   ----------   ----------   ----------
Basic and diluted net earnings (loss) per share...  $    (0.09)  $    (0.40)  $     0.43   $    (0.00)  $    (0.26)
                                                    ==========   ==========   ==========   ==========   ==========
Basic weighted average shares outstanding.........  16,661,088   20,066,006   23,456,088   23,456,088   23,456,088
                                                    ==========   ==========   ==========   ==========   ==========
Diluted weighted average shares outstanding.......  16,661,088   20,066,006   23,466,849   23,456,088   23,456,088
                                                    ==========   ==========   ==========   ==========   ==========


                            See accompanying notes.
                                       F-4


                        SALEM COMMUNICATIONS CORPORATION

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)



                                            CLASS A              CLASS B
                                         COMMON STOCK          COMMON STOCK      ADDITIONAL   RETAINED
                                      -------------------   ------------------    PAID-IN     EARNINGS/
                                        SHARES     AMOUNT    SHARES     AMOUNT    CAPITAL     (DEFICIT)    TOTAL
                                      ----------   ------   ---------   ------   ----------   ---------   --------
                                                                                     
Stockholders' equity, January 1,
  1998..............................  11,107,392    $111    5,553,696    $56      $  5,665     $ 4,850    $ 10,682
Net loss............................          --      --           --     --            --      (1,581)     (1,581)
                                      ----------    ----    ---------    ---      --------     -------    --------
Stockholders' equity, December 31,
  1998..............................  11,107,392     111    5,553,696     56         5,665       3,269       9,101
Stock grant.........................      75,000       1           --     --         1,687          --       1,688
Issuance of Class A common stock....   6,720,000      67           --     --       140,028          --     140,095
Net loss............................          --      --           --     --            --      (8,045)     (8,045)
                                      ----------    ----    ---------    ---      --------     -------    --------
Stockholders' equity, December 31,
  1999..............................  17,902,392     179    5,553,696     56       147,380      (4,776)    142,839
Net income..........................          --      --           --     --            --      10,109      10,109
                                      ----------    ----    ---------    ---      --------     -------    --------
Stockholders' equity, December 31,
  2000..............................  17,902,392     179    5,553,696     56       147,380       5,333     152,948
Net loss (unaudited)................          --      --           --     --            --      (6,009)     (6,009)
                                      ----------    ----    ---------    ---      --------     -------    --------
Stockholders' equity, June 30, 2001
  (unaudited).......................  17,902,392    $179    5,553,696    $56      $147,380     $  (676)   $146,939
                                      ==========    ====    =========    ===      ========     =======    ========


                            See accompanying notes.

                                       F-5


                        SALEM COMMUNICATIONS CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)



                                                                                                   SIX MONTHS ENDED
                                                                  YEAR ENDED DECEMBER 31,              JUNE 30,
                                                              -------------------------------   ----------------------
                                                                1998       1999       2000         2000         2001
                                                              --------   --------   ---------   -----------   --------
                                                                                                     (UNAUDITED)
                                                                                               
Operating Activities
Net income (loss)...........................................  $ (1,581)  $ (8,045)  $  10,109    $    (56)    $ (6,009)
Adjustments to reconcile net loss to net cash provided by
  operating activities:
  Depreciation and amortization.............................    14,058     18,233      25,479      10,338       15,233
  Amortization of bank loan fees............................        42         87         678          66          192
  Amortization of bond issue costs..........................       531        443         354         177          178
  Deferred income taxes.....................................      (730)    (4,106)      5,790          96       (3,576)
  (Gain) loss on sale of assets.............................      (236)       219     (29,567)     (4,408)      (2,518)
  Loss on early extinguishment of debt, before taxes........        --      5,556       1,849          --           --
  Noncash stock grant.......................................        --      1,688          --          --           --
Changes in operating assets and liabilities:
  Accounts receivable.......................................    (2,048)    (2,573)     (8,632)        185          791
  Prepaid expenses and other current assets.................       (18)    (1,747)        422         126         (281)
  Accounts payable and accrued expenses.....................     1,035     (1,555)      4,224         327          148
  Deferred subscription revenue.............................        --        384        (161)          9          (90)
  Other liabilities.........................................       166       (439)         15         271         (128)
  Income taxes..............................................      (204)        59         152          46         (190)
                                                              --------   --------   ---------    --------     --------
Net cash provided by operating activities...................    11,015      8,204      10,712       7,177        3,750
Investing Activities
  Purchases of property, plant, equipment and software......    (6,865)    (9,142)    (14,804)     (5,800)     (11,755)
  Deposits on radio station acquisitions....................     4,907     (1,325)       (512)        (45)        (612)
  Purchases of radio stations...............................   (33,682)   (11,837)   (234,853)    (41,580)     (52,794)
  Purchases of other media businesses.......................        --    (12,049)         --          --           --
  Proceeds from sale of property, plant and equipment and
    intangible assets.......................................     4,226         73      30,080         400      101,124
  Expenditures for tower construction project held for
    sale....................................................      (495)      (410)         --          --           --
  Proceeds from sale of tower construction project..........        --        914          --          --           --
  Other assets..............................................       147     (1,383)        241          98         (628)
                                                              --------   --------   ---------    --------     --------
Net cash used in investing activities.......................   (31,762)   (35,159)   (219,848)    (46,927)      35,355
Financing Activities
  Proceeds from issuance of long-term debt and notes payable
    to stockholders.........................................    40,500     18,750     204,050      13,000      161,500
  Proceeds from issuance of bridge financing................        --         --      58,000          --           --
  Net proceeds from issuance of common stock................        --    140,095          --          --           --
  Payments of long-term debt and notes payable to
    stockholders............................................   (19,200)   (94,860)    (20,810)     (2,810)    (145,208)
  Payments of bridge financing..............................        --         --     (58,000)         --           --
  Payments on capital lease obligations.....................        --       (239)       (250)       (132)         (48)
  Payment of premium on senior subordinated notes...........        --     (3,875)         --          --           --
  Payments of costs related to bank credit facility and
    bridge financing........................................        --       (709)     (4,050)         --         (782)
  Payments of bond issue costs..............................      (281)        --          --          --       (4,396)
  Payment of costs related to debt refinancing..............        --         --          --          --           --
                                                              --------   --------   ---------    --------     --------
Net cash provided by (used in) financing activities.........    21,019     59,162     178,940      10,058       11,066
                                                              --------   --------   ---------    --------     --------
Net (decrease) increase in cash and cash equivalents........       272     32,207     (30,196)    (26,692)      50,151
Cash and cash equivalents at beginning of period............     1,645      1,917      34,124      34,124        3,928
                                                              --------   --------   ---------    --------     --------
Cash and cash equivalents at end of period..................  $  1,917   $ 34,124   $   3,928    $  4,432     $ 54,079
                                                              ========   ========   =========    ========     ========
Supplemental disclosures of cash flow information:
  Cash paid during the year for:
    Interest................................................  $ 14,965   $ 15,048   $  15,831    $  4,954     $ 12,680
    Income taxes............................................       591        450         390         322          387
  Non-cash investing activities
    Fair value of assets exchanged involving boot, excluding
      amount paid in cash...................................        --         --   $   5,500          --           --
  No other exchange transactions had an impact on the
    carrying amount of the assets


                            See accompanying notes.

                                       F-6


                        SALEM COMMUNICATIONS CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND REORGANIZATION

     The accompanying consolidated financial statements of Salem Communications
Corporation ("Salem" or the "Company") include the Company and its wholly-owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated.

     Information with respect to the six months ended June 30, 2001 and 2000 is
unaudited. The accompanying unaudited consolidated financial statements have
been prepared on the same basis as the audited financial statements and, in the
opinion of management contain all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the financial position, results
of operations and cash flows of the Company and subsidiaries, for the periods
presented. The results of operations for the six month period are not
necessarily indicative of the results of operations for the full year.

     The Company is a holding company with substantially no assets, operations
or cash flows other than its investments in subsidiaries. In May 2000, the
Company formed two new wholly-owned subsidiaries, Salem Communications Holding
Corporation ("HoldCo") and Salem Communications Acquisition Corporation
("AcquisitionCo"), each a Delaware corporation. In July 2000, the Company formed
SCA License Corporation ("SCA"), a Delaware corporation. HoldCo and
AcquisitionCo are direct subsidiaries of the Company; SCA is a wholly-owned
subsidiary of AcquisitionCo. HoldCo and all of its subsidiaries are Guarantors
of the 9 1/2% Senior Subordinated Notes due 2007 (the "Existing Notes")
discussed in Note 5. Through June 30, 2001, the Guarantors (i) were wholly-owned
subsidiaries of HoldCo, (ii) comprised substantially all HoldCo's direct and
indirect subsidiaries and (iii) did and continue to fully and unconditionally
guarantee on a joint and several basis, the Notes. AcquisitionCo and SCA are not
currently guarantors of the Existing Notes. SCA owns the assets of KALC-FM. See
Note 12 for certain condensed consolidating information with respect to the
Company.

DESCRIPTION OF BUSINESS

     Salem is a domestic U.S. radio broadcast company which has traditionally
provided talk and music programming targeted at audiences interested in
religious and family issues. Salem operated 71 and 54 radio stations across the
United States at December 31, 2000 and 1999, respectively. The Company also owns
and operates Salem Radio Network ("SRN"), SRN News Network ("SNN"), Salem Music
Network ("SMN"), Reach Satellite Network ("RSN") and Salem Radio Representatives
("SRR"). SRN, SNN, SMN and RSN are radio networks which produce and distribute
talk, news and music programming to radio stations in the U.S., including some
of Salem's stations. SRR sells commercial air time to national advertisers for
Salem's radio stations and networks, and for independent radio station
affiliates.

     Salem also owns and operates OnePlace, LLC ("OnePlace") and CCM
Communications, Inc. ("CCM"). OnePlace provides on-demand audio streaming and
related services. CCM publishes magazines that follow the Christian music
industry. The revenue and related operating expenses of these businesses are
reported as "other media" on the consolidated statements of operations.

SEGMENTS

     The Company has adopted the provisions of Financial Accounting Standards
Board Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures
about Segments of an Enterprise and Related Information." The Company identifies
its operating segments based on business activities. The Company's chief
operating decision maker reviews financial information to manage the business
consistent

                                       F-7

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)


with the manner presented in the consolidated financial statements. As the
Company acquires and integrates new businesses it evaluates, based on the
nature, size and integration and management strategies, whether it has separate
reportable segments. During the three years ended December 31, 2000, the Company
had one reportable segment - the broadcasting segment. OnePlace and CCM do not
meet the quantitative thresholds as described in SFAS No. 131 and are grouped as
"Other Media" in the accompanying income statements.


REVENUE RECOGNITION

     Revenues are recognized when pervasive evidence of an arrangement exists,
delivery has occurred or the service has been rendered, the price to the
customer is fixed or determinable and collection of the arrangement fee is
reasonably assured.

     Revenue from radio programs and commercial advertising is recognized when
broadcast. Salem's broadcasting customers principally include not-for-profit
charitable organizations and commercial advertisers.

     Revenue from the sale of products and services from the Company's other
media businesses is recognized when the products are shipped and the services
are rendered. Revenue from the sale of advertising in CCM's publications is
recognized upon publication. Revenue from the sale of subscriptions to CCM's
publications is recognized over the life of the subscription.

     Advertising by the radio stations exchanged for goods and services is
recorded as the advertising is broadcast and is valued at the estimated value of
goods or services received or to be received. The value of the goods and
services received in such barter transactions is charged to expense when used.
The estimated fair value of the barter advertising provided for the years ended
December 31, 1998, 1999 and 2000, was approximately $2,510,000, $2,936,000 and
$3,053,000, respectively. Barter expenses were approximately the same. Barter
advertising provided and barter expenses incurred are included net in
broadcasting operating expenses.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards requiring that all derivatives be
recorded in the balance sheet as either an asset or liability measured at fair
value and that changes in fair value be recognized currently in earnings, unless
specific hedge accounting criteria are met. Certain provisions of SFAS No. 133,
including its required implementation date, were subsequently amended. The
Company adopted SFAS No. 133, as amended, in the first quarter of 2001 and its
adoption did not have a material effect on the Company's results of operations
or financial position.

     In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 provides guidance on applying generally accepted
accounting principles to revenue recognition issues in financial statements. The
Company adopted SAB No. 101 in the fourth quarter of 2000 and its adoption has
not had a material effect on the Company's results of operations or financial
position.

     In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
Business Combinations, and No. 142, Goodwill and Other Intangible Assets,
effective for fiscal years beginning after December 15, 2001. Under the new
rules, goodwill and intangible assets deemed to have indefinite lives

                                       F-8

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

will no longer be amortized but will be subject to annual impairment tests in
accordance with the Statements. Other intangible assets will continue to be
amortized over their useful lives.

                                      F-8.1

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

     The company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
nonamortization provisions of SFAS No. 142 is expected to result in an increase
in net income of approximately $23 million ($0.98 per share) per year. During
2002, the company will perform the first of the required impairment tests of
goodwill and indefinite lived intangible assets as of January 1, 2002 and has
not yet determined what the effect of these tests will be on the earnings and
financial position of the company.

CASH EQUIVALENTS

     Salem considers all highly liquid debt instruments with a maturity of three
months or less when purchased to be cash equivalents. The recorded amount for
cash and cash equivalents approximates the fair market value.

PROPERTY, PLANT, EQUIPMENT AND SOFTWARE

     Property, plant, equipment and software are recorded at cost less
accumulated depreciation. Depreciation is computed using the straight-line
method over estimated useful lives as follows:

                                                           
Buildings...................................................  40 years
Office furnishings and equipment............................  5 - 10 years
Antennae, towers and transmitting equipment.................  20 years
Studio and production equipment.............................  10 years
Computer software...........................................  3 - 5 years
Record and tape libraries...................................  20 years
Automobiles.................................................  5 years
Leasehold improvements......................................  15 years



     The carrying value of property, plant, equipment and software is evaluated
periodically in relation to the operating performance and anticipated future
cash flows of the underlying radio stations and businesses for indicators of
impairment. When indicators of impairment are present and the undiscounted cash
flows estimated to be generated from these assets are less than the carrying
value of these assets an adjustment to reduce the carrying value to the fair
market value of the assets is recorded, if necessary. No adjustments to the
carrying amounts of property, plant, equipment and software have been made
during the years ended December 31, 1998, 1999 and 2000.

INTANGIBLE ASSETS

     Intangible assets acquired in conjunction with the acquisition of various
radio stations and other media businesses are being amortized over the following
estimated useful lives using the straight-line method:

                                                           
Broadcast licenses..........................................  10 - 25 years
Noncompetition agreements...................................  3 - 5 years
Customer lists and contracts................................  10 - 15 years
Favorable and assigned leases...............................  Life of the lease
Goodwill....................................................  15 - 40 years
Other.......................................................  5 - 10 years



     The carrying value of intangibles is evaluated periodically in relation to
the operating performance and anticipated future cash flows of the underlying
radio stations and businesses for indicators of impairment. When indicators of
impairment are present and the undiscounted cash flows estimated to be generated
from these assets are less than the carrying amounts of these assets, an
adjustment to reduce the carrying

                                       F-9

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

value to the fair market value of these assets is recorded, if necessary. No
adjustments to the carrying amounts of intangible assets have been made during
the year ended December 31, 1998, 1999 and 2000.

BOND ISSUE COSTS

     Bond issue costs are being amortized over the term of the Notes as an
adjustment to interest expense.

ACCOUNTING FOR STOCK BASED COMPENSATION

     Employee stock options are accounted for under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," which requires the
recognition of expense when the option price is less than the fair value of the
stock at the date of grant.

     The Company generally awards options for a fixed number of shares at an
option price equal to the fair value at the date of grant. The Company has
adopted the disclosure-only provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation" (see Note 8).

INCOME TAXES

     The Company accounts for income taxes in accordance with the liability
method of providing for deferred income taxes. Deferred income taxes arise from
temporary differences between the tax basis of assets and liabilities and their
reported amounts in the financial statements.

COMPREHENSIVE INCOME

     In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS 130 establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The Company has not had any transactions that are required
to be reported as a component of other Comprehensive Income other than the net
income (loss) reported in the Statements of Operations.

BASIC AND DILUTED NET EARNINGS (LOSS) PER SHARE

     Basic net earnings (loss) per share has been computed using the weighted
average number of shares of common stock outstanding during the period. Diluted
net earnings (loss) per share is computed using the weighted average number of
shares of common stock outstanding during the period plus the dilutive effects
of stock options.

     Options to purchase 0 shares, 304,500 shares, 300,939 shares, 305,500
shares, and 474,580 shares of common stock with exercise prices greater than the
average market prices of common stock were outstanding at December 31, 1998,
December 31, 1999, December 31, 2000, June 30, 2000 and June 30, 2001
respectively. These options were excluded from the respective computations of
diluted net earnings (loss) per share because their effect would be
anti-dilutive.

                                       F-10

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

     The following table sets forth the computation of basic and diluted net
earnings (loss) per share for the periods indicated:



                                                    YEAR ENDED DECEMBER 31,           SIX MONTHS ENDED JUNE 30,
                                            ---------------------------------------   -------------------------
                                               1998          1999          2000          2000          2001
                                            -----------   -----------   -----------   -----------   -----------
                                                                                     
Numerator:
  Net income (loss).......................  $(1,581,000)  $(8,045,000)  $10,109,000   $   (56,000)  $(6,009,000)
Denominator for basic earnings (loss) per
  share:
  Weighted average shares.................   16,661,088    20,066,066    23,456,088    23,456,088    23,456,088
Denominator for diluted earnings (loss)
  per share:
Effect of dilutive securities -- stock
  options.................................           --            --        10,761            --            --
  Weighted average shares adjusted for
    dilutive securities...................   16,661,088    20,066,066    23,466,849    23,456,088    23,456,088
                                            -----------   -----------   -----------   -----------   -----------
Basic and diluted earnings (loss) per
  share...................................  $     (0.09)  $     (0.40)  $      0.43   $     (0.00)  $     (0.26)
                                            ===========   ===========   ===========   ===========   ===========


CONCENTRATIONS OF BUSINESS AND CREDIT RISKS

     The majority of the Company's operations are conducted in several locations
across the country. The Company's credit risk is spread across a large number of
customers, none of which account for a significant volume of revenue or
outstanding receivables. The Company does not normally require collateral on
credit sales; however, credit histories are reviewed before extending
substantial credit to any customer. The Company establishes an allowance for
doubtful accounts based on customers' payment history and perceived credit
risks. Bad debts have been within management's expectations.

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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

RECLASSIFICATIONS

     Certain reclassifications were made to the prior year financial statements
to conform to the current year presentation.

2. ACQUISITIONS AND DISPOSITIONS OF ASSETS

     The Company used the purchase method of accounting for all of the
acquisitions described below, and, accordingly, the operating results of the
acquired assets and businesses are included in the consolidated operating
results since the dates of acquisition.

                                       F-11

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

     The Company purchased the assets (principally intangibles) of the following
radio stations during the six months ended June 30, 2001:



                                                                               ALLOCATED
       ACQUISITION DATE             STATION            MARKET SERVED         PURCHASE PRICE
       ----------------          --------------    ----------------------    --------------
                                                                             (IN THOUSANDS)
                                                                    
February 2, 2001...............  WXRT-AM           Chicago, IL                  $29,000
                                 (now WYLL-AM)
February 16, 2001..............  WWTC-AM           Minneapolis, MN                4,882
February 16, 2001..............  WZER-AM           Milwaukee, WI                  2,018
                                 (now WYLO-AM)
March 9, 2001..................  WRBP-AM           Youngstown-Warren, OH            500
                                 (now WHKW-AM)
March 16, 2001.................  WFIA-AM           Louisville, KY                 1,750
April 1, 2000..................  WROL-AM           Boston, MA                    10,930
                                                                                -------
                                                                                $49,080
                                                                                =======


     On January 22, 2001, the Company sold the assets of radio station KALC-FM,
Denver, CO for approximately $100 million. The net proceeds have been placed in
an account with a qualified intermediary under a like-kind exchange agreement in
order to preserve our ability to effect a tax-deferred exchange. As of June 30,
2001, the Company used $49.1 million of the proceeds in the above acquisitions.
The balance of $50.6 million is reflected in cash and cash equivalents at June
30, 2001.

     On May 21, 2001, the Company acquired the assets of the Dame-Gallagher
Networks, LLC, including the syndicated radio program The Mike Gallagher Show,
for $3.0 million in cash and $1.3 million in a non-interest bearing promissory
note payable in two equal installments due January 2002 and January 2003.

     On May 17, 2001, the Company entered into a local marketing agreement
whereby the company operates KLNA-FM (now KKFS-FM), Sacramento, California, and
has an option to acquire the assets of the radio station for $8.7 million by or
before March 2002.

     In May 2001, the Company entered into an agreement to acquire a
construction permit to build a new radio station in Milwaukee, Wisconsin for
$6.5 million.

     On June 14, 2001, the Company entered into an agreement to acquire the
assets of radio station KSZZ-AM, San Bernardino, California, for $7.0 million.
The Company anticipates this transaction to close in the second half of 2001.

     On June 26, 2001, the Company entered into an agreement to sell the assets
of radio station KEZY-AM, San Bernardino, California, for $4.0 million to a
corporation owned by one of our Board members. The Company anticipates this
transaction to close in the second half of 2001.

     In June 2001, the Company entered into an agreement to acquire the assets
of radio station WTBN-AM, Tampa, Florida, for $6.8 million. The Company
anticipates this transaction to close in the third quarter of 2001. The Company
began to operate this station under a local marketing agreement on July 16,
2001.

                                       F-12

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

     During the year ended December 31, 2000, the Company purchased the assets
(principally intangibles) of the following radio stations:



                                                                              ALLOCATED
     ACQUISITION DATE               STATION              MARKET SERVED      PURCHASE PRICE
     ----------------        ----------------------    -----------------    --------------
                                                                            (IN THOUSANDS)
                                                                   
January 4, 2000............  WNIV-AM and WLTA-AM       Atlanta, GA             $  8,000
January 10, 2000...........  WABS-AM                   Washington, D.C.           4,100
January 25, 2000...........  KJQI-FM                   San Francisco, CA          8,000
February 15, 2000..........  KAIM-AM/FM                Honolulu, HI               1,800
February 16, 2000..........  KHNR-AM and KGU-AM        Honolulu, HI               1,700
April 4, 2000..............  WGKA-AM                   Atlanta, GA                8,000
June 30, 2000..............  KSKY-AM                   Dallas, TX                13,000
August 24, 2000 (1)........  KALC-FM                   Denver, CO               100,000
August 24, 2000 (1)........  KDGE-FM                   Dallas, TX                33,271
August 24, 2000 (1)........  WYGY-FM                   Cincinnati, OH            18,109
August 24, 2000 (1)........  KEZY-AM (now KXMX-AM)     Anaheim, CA               12,449
August 24, 2000 (1)........  KXMX-FM (now KFSH-FM)     Anaheim, CA                9,069
August 24, 2000 (1)........  WKNR-AM                   Cleveland, OH              7,437
August 24, 2000 (1)........  WRMR-AM                   Cleveland, OH              4,738
August 24, 2000 (1)........  WBOB-AM                   Cincinnati, OH               527
October 2, 2000............  KCBQ-AM                   San Diego, CA              4,250
October 5, 2000............  WGTK-AM                   Louisville, KY             1,750
                                                                               --------
                                                                               $236,200
                                                                               ========


------------------------------
(1) These stations were acquired in one transaction for $185.6 million.

     The purchase price has been allocated to the assets acquired as follows:



                           ASSET                                  AMOUNT
                           -----                              --------------
                                                              (IN THOUSANDS)
                                                           
Property and equipment......................................     $ 12,885
Broadcast licenses..........................................      222,624
Goodwill and other intangibles..............................          691
                                                                 --------
                                                                 $236,200
                                                                 ========


     On February 25, 2000, the Company purchased the KRLA-AM transmitter site in
Los Angeles, CA, for $2.8 million.

     On March 31, 2000, the Company purchased all of the outstanding shares of
stock of RSN for $3.1 million. RSN owns and operates Solid Gospel, a radio
broadcasting network that produces and distributes music programming to its own
radio stations WBOZ-FM and WVRY-FM, Nashville, TN, and to independent radio
station affiliates. RSN also owns and operates SolidGospel.com, a web site on
the Internet.

     During 2000, the Company sold certain assets of OnePlace resulting in a
loss of $3.5 million recorded in gain (loss) on sale of assets.

     On June 30, 2000, the Company exchanged the assets of radio station
KPRZ-FM, Colorado Springs, CO, plus $7.5 million for the assets of radio station
KSKY-AM, Dallas, TX. Radio station KPRZ-FM was recorded at its fair value and a
gain of approximately $4.3 million was recognized.

     On August 22, 2000, the Company sold the assets of radio station KLTX-AM,
Los Angeles, CA for $29.5 million to a corporation owned by one of our Board
members, resulting in a gain of $28.8 million.

                                       F-13

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)


     On September 1, 2000, the Company exchanged the assets of radio station
KKHT-FM, Houston, TX for the assets of radio stations WALR-FM (now WFSH-FM),
Atlanta, GA, KLUP-AM, San Antonio, TX, and WSUN-AM, Tampa, FL. The Company
analyzed the assets given up and received in the exchange under Emerging Issues
Task Force 98-3, Determining Whether a Nonmonetary Transaction Involves Receipt
of Productive Assets or a Business, and determined the respective sets of assets
did not meet the definition of a business. The assets acquired and given up in
the exchange were considered similar productive assets. Accordingly, no gain or
loss was recognized on this transaction.


     On November 9, 2000, the Company entered into an agreement to exchange the
assets of radio station WHK-AM, Cleveland, OH and WHK-FM, Canton, OH plus $10.5
million for the transmitting facility of radio station WCLV-FM, Cleveland, OH.
The Company anticipates this transaction to close in the first half of 2001.

     On November 20, 2000, the Company exchanged the assets of radio station
KDGE-FM, Dallas, TX for the assets of radio station KLTY-FM, Dallas, TX. No gain
or loss was recognized on this transaction since KDGE-FM was acquired and sold
soon thereafter.

     The following pro forma consolidated results of operations give effect to
the acquisitions of in-format radio stations made during the year ended December
31, 2000 as if the acquisitions occurred on January 1, 1999 and was prepared
based upon the historical statements of operations of the acquired radio
stations. The Company does not provide any pro forma information with respect to
radio stations in which the format was changed, as the historical results would
not be meaningful. The pro forma results also give effect to the disposition of
radio stations KLTX-AM as if it occurred on January 1, 1999. The pro forma
results of operations exclude the effect of the sale of radio stations KPRZ-FM,
KKHT-FM, WHKK-AM and WHK-FM, which were exchanged for other radio stations,
because the operations of these stations had been integrated with the operations
of existing stations prior to the sale and the effect of such dispositions are
not material. The pro forma results of operations include certain adjustment
such as increased interest and amortization expense associated with the
borrowings to fund the acquisitions and FCC licenses acquired and are not
necessarily indicative of actual operations results. The stations included in
the pro forma results of operations are as follows: KSKY-AM, WYGY-FM, KEZY-AM,
WKNR-AM, WRMR-AM, WBOB-AM, WGTK-AM, WALR-FM, KLUP-AM, WSUN-AM and KLTY-FM.



                                                               YEAR ENDED DECEMBER 31,
                                                              --------------------------
                         PRO FORMA                               1999           2000
                         ---------                            -----------    -----------
                                                              (IN THOUSANDS, EXCEPT PER
                                                              SHARE AND PER SHARE DATA)
                                                                       
Total revenue...............................................   $ 111,856      $ 130,001
Loss before extraordinary item..............................     (22,054)       (20,891)
Net income (loss)...........................................     (25,624)       (22,078)
Basic and diluted earnings (loss) per share.................   $   (1.09)     $   (0.94)


     During the year ended December 31, 1999, the Company purchased the assets
(principally intangibles) of the following radio stations:



                                                                          ALLOCATED
            ACQUISITION DATE               STATION    MARKET SERVED     PURCHASE PRICE
            ----------------               -------    --------------    --------------
                                                                        (IN THOUSANDS)
                                                               
April 30, 1999...........................  KKOL-AM    Seattle, WA          $ 1,750
July 23, 1999............................  KCTK-AM    Phoenix, AZ            5,000
September 13, 1999.......................  WLSY-FM    Louisville, KY         2,500
September 13, 1999.......................  WRVI-FM    Louisville, KY         2,500
                                                                           -------
                                                                           $11,750
                                                                           =======


                                       F-14

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

     The purchase price has been allocated to the assets acquired as follows:



                           ASSET                                  AMOUNT
                           -----                              --------------
                                                              (IN THOUSANDS)
                                                           
Property and equipment......................................     $ 2,160
Broadcast licenses..........................................       9,557
Goodwill and other intangibles..............................          33
                                                                 -------
                                                                 $11,750
                                                                 =======


     In addition to the stations above, in January 1999, the Company purchased
the assets of OnePlace for $6.2 million, and all the outstanding shares of stock
of CCM for $1.9 million. The purchases were financed primarily by an additional
borrowing.

     On March 11, 1999, the Company acquired the assets of Christian Research
Report ("CRR") for $300,000. The publications of CRR follow the contemporary
Christian music industry.

     On August 25, 1999, the Company purchased the assets of the Internet sites
AudioCentral.com and ChristianBooks.com for $400,000 cash and $600,000 non-cash
consideration.

     On October 19, 1999, the Company acquired the assets of Gospel Media
Network, Inc., relating to the audio and video streaming of content on the
GospelMedia.com Internet site, for $475,000.

     On November 30, 1999, the Company acquired the assets of the Involved
Christian Radio Network, which provides streaming media on its Internet site,
ICRN.com, for $3.0 million.

     The revenue and operating expenses of these businesses are reported as
"other media" on our consolidated statements of operations.

     Pro forma information to present operating results as if the acquisitions
discussed above had occurred at the beginning of the year acquired is not
presented because the Company generally changes the programming format of the
radio stations such that the source and nature of revenue and operating expenses
are significantly different than they were prior to the acquisition and,
accordingly, historical and pro forma financial information has not been
considered meaningful by management. Pro forma and historical financial
information of radio stations acquired where the format was not changed and of
other media businesses acquired have not been significant to the consolidated
financial position or operating results of the Company.

     The table below summarizes the other media acquisitions during 1999:



                                                                      ALLOCATED
       ACQUISITION DATE                      ENTITY                 PURCHASE PRICE
       ----------------         --------------------------------    --------------
                                                                    (IN THOUSANDS)
                                                              
January 29, 1999..............  OnePlace                               $ 6,150
January 29, 1999..............  CCM                                      1,886
March 11, 1999................  Christian Research Report                  300
August 25, 1999...............  AudioCentral                             1,000
October 19, 1999..............  Gospel Media Network, Inc.                 475
November 30, 1999.............  Involved Christian Radio Network         3,000
                                                                       -------
                                                                       $12,811
                                                                       =======


                                       F-15

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

     The purchase price has been allocated to the assets acquired and
liabilities assumed as follows:



                                                                  AMOUNT
                                                              --------------
                                                              (IN THOUSANDS)
                                                           
ASSETS
Accounts receivable and other current assets................     $ 1,453
Property, plant, equipment and software.....................       5,764
Subscriber base and domain names............................       2,246
Goodwill and other intangible assets........................       8,790
Other assets................................................         607
                                                                 -------
                                                                  18,860
LIABILITIES
Accounts payable and other current liabilities..............      (3,437)
Other long-term liabilities.................................      (2,612)
                                                                 -------
                                                                  (6,049)
                                                                 -------
Purchase price..............................................     $12,811
                                                                 =======


     During the year ended December 31, 1998, the Company purchased the assets
(principally intangibles) of the following radio stations:



                                                                      ALLOCATED
   ACQUISITION DATE            STATION            MARKET SERVED     PURCHASE PRICE
   ----------------     ---------------------    ---------------    --------------
                                                                    (IN THOUSANDS)
                                                           
August 21, 1998.......  KKMO-AM                  Tacoma, WA            $   500
August 26, 1998.......  KIEV-AM (now KRLA-AM)    Los Angeles, CA        33,210
October 30, 1998......  KYCR-AM                  Minneapolis, MN           500
October 30, 1998......  KTEK-AM                  Houston, TX             2,061
                                                                       -------
                                                                       $36,271
                                                                       =======


     The purchase price has been allocated to the assets acquired as follows:



                                                                  AMOUNT
                                                              --------------
                                                              (IN THOUSANDS)
                                                           
ASSETS
Property and equipment......................................     $ 4,507
Broadcast licenses..........................................      29,627
Goodwill and other intangibles..............................       2,137
                                                                 -------
                                                                 $36,271
                                                                 =======


     In 1998, the Company sold the assets (principally intangibles) of radio
stations KTSL-FM, Spokane, WA, for $1.3 million and KAVC-FM, Lancaster, CA, for
$1.6 million.

     Pro forma information to present operating results as if the acquisitions
discussed above had occurred at the beginning of the year acquired is not
presented because the Company generally changes the programming format of the
radio stations such that the source and nature of revenue and operating expenses
are significantly different than they were prior to the acquisition and,
accordingly, historical and pro forma financial information has not been
considered meaningful by management. Pro forma and historical financial
information of radio stations acquired where the format was not changed and of
other media businesses acquired have not been significant to the consolidated
financial position or operating results of the Company.

                                       F-16

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

3. DUE FROM STOCKHOLDERS

     The amounts due from stockholders represent short-term advances made to
stockholders of the Company.

4. PROPERTY, PLANT, EQUIPMENT AND SOFTWARE

     Property, plant, equipment and software consisted of the following at
December 31:



                                                                 DECEMBER 31,
                                                              -------------------
                                                               1999        2000
                                                              -------    --------
                                                                (IN THOUSANDS)
                                                                   
Land........................................................  $ 1,974    $  4,341
Buildings...................................................    1,742       3,335
Office furnishings and equipment............................   12,952      16,041
Antennae, towers and transmitting equipment.................   32,672      38,023
Studio and production equipment.............................   18,613      20,026
Computer software...........................................    4,427       2,528
Record and tape libraries...................................      527         534
Automobiles.................................................      166         298
Leasehold improvements......................................    4,877       6,182
Construction-in-progress....................................    4,658      14,357
                                                              -------    --------
                                                               82,608     105,665
Less accumulated depreciation...............................   31,943      36,661
                                                              -------    --------
                                                              $50,665    $ 69,004
                                                              =======    ========


 5. LONG-TERM DEBT

     Long-term debt consisted of the following at:



                                                                  DECEMBER 31,
                                                              --------------------
                                                                1999        2000
                                                              --------    --------
                                                                 (IN THOUSANDS)
                                                                    
Revolving line of credit with banks.........................  $     --    $186,050
9 1/2% Senior Subordinated Notes due 2007...................   100,000     100,000
Obligation to acquire KRLA-AM property......................     2,810          --
Capital leases acquired through OnePlace....................       344          93
Seller financed note to acquire GospelMedia.................       181          --
                                                              --------    --------
                                                               103,335     286,143
Less current portion........................................     3,248          93
                                                              --------    --------
                                                              $100,087    $286,050
                                                              ========    ========


     Since the revolving line of credit with banks carries a floating interest
rate, the carrying amount approximates its fair market value. The Notes were
issued in September 1997 at par. At December 31, 2000, the fair market value of
the Notes was approximately $95.0 million.

                                       F-17

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

REVOLVING LINE OF CREDIT WITH BANKS

     HoldCo has a credit agreement with a syndicate of lending institutions (the
"Credit Agreement") to provide for borrowing capacity of up to $225 million
under a revolving line of credit. The maximum amount that HoldCo may borrow
under the Credit Agreement is limited by a ratio of HoldCo's existing adjusted
debt to pro forma twelve-month cash flow, as defined in the Credit Agreement
(the Adjusted Debt to Cash Flow Ratio). At December 31, 2000, the maximum
Adjusted Debt to Cash Flow Ratio allowed under the Credit Agreement was 6.50 to
1.00. At December 31, 2000, the Adjusted Debt to Cash Flow Ratio was 5.45 to
1.00, resulting in total borrowing availability of approximately $39.0 million.
The maximum Adjusted Debt to Cash Flow Ratio allowed under the Credit Agreement
is 6.50 to 1 through December 30, 2001. Thereafter, the maximum ratio will
decline periodically until December 31, 2005, at which point it will remain at
4.00 to 1 through June 2007.

     The note underlying the revolving line of credit bears interest at a
fluctuating base rate plus a spread that is determined by Salem's Adjusted Debt
to Cash Flow Ratio. At HoldCo's option, the base rate is either a bank's prime
rate or LIBOR. For purposes of determining the interest rate the prime rate
spread ranges from 0% to 1.5%, and the LIBOR spread ranges from .875% to 2.75%.
Interest is payable quarterly. Commencing March 31, 2002, and every quarter
thereafter, the commitment under the Credit Agreement reduces by increasing
amounts through June 30, 2007, when it expires.

     The Credit Agreement with the banks (a) provides for restrictions on
additional borrowings and leases; (b) prohibits Salem, without prior approval
from the banks, from paying dividends, liquidating, merging, consolidating or
selling its assets or business, and (c) requires HoldCo to maintain certain
financial ratios and other covenants. Salem has pledged all of its assets as
collateral under the Credit Agreement. Additionally, all the Company's stock
holdings in its subsidiaries are pledged as collateral.

     In July 1999, the Company used a portion of the net proceeds from its
initial public offering to repay all amounts due under a previous revolving line
of credit with the banks, and to repurchase $50 million principal amount of the
Notes. The Company wrote off certain deferred financing costs (including bond
issue costs of $1.5 million) and paid a premium of $3.9 million on the Notes.
The write-off and premium of $3,570,000, net of a $1,986,000 income tax benefit,
was recorded as an extraordinary item in the accompanying statement of
operations for the year ended December 31, 1999.

9 1/2% SENIOR SUBORDINATED NOTES DUE 2007

     On August 24, 2000, the Company supplemented the indenture for the senior
subordinated notes in connection with the assignment of substantially all of the
assets and liabilities of the Company to HoldCo, including the obligations as
successor issuer under the indenture.

     The Existing Notes bear interest at 9 1/2% per annum, with interest payment
dates on April 1 and October 1, commencing April 1, 1998. Principal is due on
the maturity date, October 1, 2007. The Existing Notes are redeemable at the
option of the Company, in whole or in part, at any time on or after October 1,
2002, at the redemption prices specified in the indenture. The Existing Notes
are fully and unconditionally guaranteed, jointly and severally, on a senior
subordinated basis by the Guarantors (the HoldCo subsidiaries). The Existing
Notes are general unsecured obligations of the Company, subordinated in right of
payment to all existing and future senior indebtedness, including the Company's
obligations under the Credit Agreement. The indenture limits the incurrence of
additional indebtedness by the Company, the payment of dividends, the use of
proceeds of certain asset sales, and contains certain other restrictive
covenants affecting the Company.

                                       F-18

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

9% SENIOR SUBORDINATED NOTES DUE 2011

     In June 2001, HoldCo completed an offering of $150.0 million 9% senior
subordinated notes ("New Notes") and used the net proceeds of the offering to
repay approximately $145.5 million of borrowings under the credit facility.
Interest payments are due on January 1 and July 1, commencing January 1, 2002.
Principal is due on the maturity date, July 1, 2011.

BRIDGE LOAN

     In order to finance the eight radio stations acquired on August 24, 2000,
the Company borrowed $58 million under a bridge loan provided by ING (U.S.)
Capital, LLC as Agent. The entire amount borrowed was due on August 24, 2001. On
November 7, 2000, the Company paid off the bridge loan using available cash,
interest reserves and $48.3 million of borrowing under the existing credit
facility. In connection with the repayment of the bridge loan, the Company
wrote-off certain deferred financing costs. The write-off of $1,187,000, net of
a $662,000 income tax benefit, was recorded as an extraordinary item in the
accompanying statement of operations for the year ended December 31, 2000.

OTHER DEBT

     In August 1998, in connection with the Company's acquisition of KRLA-AM,
the Company agreed to lease the real property on which the station's towers and
transmitter are located for $10,000 per month. The Company also agreed to
purchase the property for $3 million in February 2000. The Company recorded this
transaction in a manner similar to a capital lease. The amount recorded as a
long-term obligation at December 31, 1998, represents the present value of the
future commitments under the lease and purchase contract, discounted at 8.5%.
The obligation is classified as current at December 31, 1999 and was paid in
February 2000.

     In connection with the acquisition of OnePlace in January 1999, the Company
acquired several capital leases related to various data processing equipment.
The obligation recorded at December 31, 1999 and 2000 represents the present
value of future commitments under the lease agreements.

     In connection with the acquisition of Gospel Media Network, Inc. ("Gospel
Media"), the Company incurred an obligation to make future payments to the
seller. The Company sold Gospel Media on August 14, 2000. As part of the sale
agreement, these future commitments were forgiven.

MATURITIES OF LONG-TERM DEBT

     Principal repayment requirements under all long-term debt agreements
outstanding at December 31, 2000, for each of the next five years and thereafter
are as follows:

                                                         
2001......................................................  $     93
2002......................................................        --
2003......................................................        --
2004......................................................        --
2005......................................................        --
Thereafter................................................   286,050
                                                            --------
                                                            $286,143
                                                            ========



                                       F-19

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

6. INCOME TAXES

     In connection with the 1999 acquisition of CCM the Company recorded a net
deferred tax liability of $1,468,000 and in connection with the 2000 acquisition
of RSN, the Company recorded a net deferred tax liability of $739,000, which
amounts were recorded as an increase to the deferred tax liability and is not
reflected in the income tax benefit in 1999 and the income tax provision in
2000.

     The consolidated provision (benefit) for income taxes for Salem consisted
of the following at December 31:



                                                           1998      1999       2000
                                                           -----    -------    ------
                                                                 (IN THOUSANDS)
                                                                      
CURRENT:
  Federal................................................  $  --    $    --    $   --
  State..................................................    387        509       543
                                                           -----    -------    ------
                                                             387        509       543
DEFERRED:
  Federal................................................   (467)    (3,507)    5,941
  State..................................................   (263)      (599)      512
                                                           -----    -------    ------
                                                            (730)    (4,106)    6,996
  Current tax benefit reflected in net extraordinary
     loss................................................     --     (1,986)     (662)
                                                           -----    -------    ------
  Income tax provision (benefit).........................  $(343)   $(1,611)   $6,334
                                                           =====    =======    ======


     The consolidated deferred tax asset and liability consisted of the
following at December 31:



                                                               1999       2000
                                                              -------    -------
                                                                (IN THOUSANDS)
                                                                   
DEFERRED TAX ASSETS:
  Financial statement accruals not currently deductible.....  $ 1,140    $ 2,233
  Net operating loss, AMT credit and other carryforwards....    5,413     10,060
  State taxes...............................................      176        185
  Other.....................................................      537        462
                                                              -------    -------
  Total deferred tax assets.................................    7,266     12,940
  Valuation allowance for deferred tax assets...............     (860)    (2,057)
                                                              -------    -------
  Net deferred tax assets...................................    6,406     10,883

DEFERRED TAX LIABILITIES:
  Excess of net book value of property, plant, equipment and
     software for financial reporting purposes over tax
     basis..................................................    4,292      3,851
  Excess of net book value of intangible assets for
     financial reporting purposes over tax basis............    7,842     19,267
  Other.....................................................      772        794
                                                              -------    -------
  Total deferred tax liabilities............................   12,906     23,912
                                                              -------    -------
  Net deferred tax liabilities..............................  $ 6,500    $13,029
                                                              =======    =======


                                       F-20

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

     The following table reconciles the above net deferred tax liabilities to
the financial statements at December 31:



                                                           1999        2000
                                                          -------    --------
                                                            (IN THOUSANDS)
                                                               
Deferred income tax asset per balance sheet.............  $   732    $  2,250
Deferred income tax liability per balance sheet.........   (7,232)    (15,279)
                                                          -------    --------
                                                          $(6,500)   $(13,029)
                                                          =======    ========


     A reconciliation of the statutory federal income tax rate to the effective
tax rate, as a percentage of income before income taxes, is as follows:



                                                               YEAR ENDED DECEMBER 31,
                                                              -------------------------
                                                              1998      1999      2000
                                                              -----     -----     -----
                                                                         
Statutory federal income tax rate...........................   (34)%     (34)%     35%
State income taxes, net.....................................     4         1        4
Nondeductible expenses......................................     7         7        1
Exclusion of income taxes of S corporations and the
  Partnership...............................................    --        --       --
Change in taxable entity (S corporation to C corporation)...    --        --       --
Other, net..................................................     5        --       (2)
                                                               ---       ---       --
                                                               (18)%     (26)%     38%
                                                               ===       ===       ==


     At December 31, 2000, the Company has net operating loss carryforwards for
federal income tax purposes of approximately $22,200,000 which expire in years
2010 through 2020 and for state income tax purposes of approximately $52,100,000
which expire in years 2002 through 2020. The Company has federal alternative
minimum tax credit carryforwards of approximately $147,000. For financial
reporting purposes at December 31, 1999 and 2000 the Company has a valuation
allowance of $860,000 and $2,057,000, respectively, to offset a portion of the
deferred tax assets related to the state net operating loss carryforwards.

7. COMMITMENTS AND CONTINGENCIES

     Salem leases various land, offices, studios and other equipment under
operating leases that expire over the next 10 years. The majority of these
leases are subject to escalation clauses and may be renewed for successive
periods ranging from one to five years on terms similar to current agreements
and except for specified increases in lease payments. Rental expense included in
operating expense under all lease agreements was $4,800,000, $6,000,000 and
$7,400,000 in 1998, 1999, and 2000, respectively.

                                       F-21

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

     Future minimum rental payments required under operating leases that have
initial or remaining noncancelable lease terms in excess of one year as of
December 31, 2000, are as follows:



                                                    RELATED PARTIES     OTHER      TOTAL
                                                    ---------------    -------    -------
                                                               (IN THOUSANDS)
                                                                         
2001..............................................      $1,148         $ 5,201    $ 6,349
2002..............................................       1,002           4,428      5,430
2003..............................................         919           4,154      5,073
2004..............................................         739           3,934      4,673
2005..............................................         667           3,039      3,706
Thereafter........................................       1,445          13,631     15,076
                                                        ------         -------    -------
                                                        $5,920         $34,387    $40,307
                                                        ======         =======    =======


     The Company had a deferred compensation agreement with one of its officers,
which would have provided for retirement payments to the officer for a period of
ten consecutive years, if he remained employed by the Company until age 60. The
retirement payments were based on a formula defined in the agreement. The
estimated obligation under the deferred compensation agreement was being
provided for over the service period. At December 31, 1998 and 1999, a liability
of approximately $432,000 and $494,000 respectively, is included in other
liabilities in the accompanying balance sheet for the amounts earned under this
agreement. The officer terminated his employment with the Company in 2000 and
therefore there is no liability recorded as of December 31, 2000. Corporate
expenses were reduced by $404,000 in 2000 due to the termination of this
agreement.

     The Company and its subsidiaries, incident to its business activities, are
parties to a number of legal proceedings, lawsuits, arbitration and other
claims, including the Gospel Communications International, Inc. ("GCI") matter
described in more detail below. Such matters are subject to many uncertainties
and outcomes are not predictable with assurance. Also, the Company maintains
insurance which may provide coverage for such matters. Consequently, the Company
is unable to ascertain the ultimate aggregate amount of monetary liability or
the financial impact with respect to these matters as of June 30, 2001. However,
the Company believes, at this time, that the final resolution of these matters,
individually and in the aggregate, will not have a material adverse effect upon
the Company's annual consolidated financial position, results of operations or
cash flows.

     On December 6, 2000, GCI made a demand for arbitration upon Salem. The
demand, pending before an arbitration panel of the American Arbitration
Association, alleges Salem and its subsidiary OnePlace, Ltd. failed to provide
certain e-commerce software to GCI pursuant to a written contract between GCI
and OnePlace, for which GCI seeks $5.0 million in damages. The Company has filed
an answer to the demand, denying the factual basis for certain elements of GCI's
claims and has asserted counterclaims against GCI for breach of contract. By
consent of the parties, the matter has been submitted to nonbinding mediation.
Although there can be no assurance that the GCI matter will be resolved in favor
of the Company, Salem will vigorously defend the action and pursue its
counterclaims against GCI.

8. STOCK OPTION PLAN

     The 1999 Stock Incentive Plan (the "Plan") allows the Company to grant
stock options to employees, directors, officers and advisors of the Company. A
maximum of 1,000,000 shares were authorized under the Plan. Options generally
vest over five years and have a maximum term of 10 years. The Plan provides that
vesting may be accelerated in certain corporate transactions of the Company. The
Plan provides that the Board of Directors, or a committee appointed by the
Board, has discretion, subject

                                       F-22

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

to certain limits, to modify the terms of outstanding options. At December 31,
2000, the Company had 644,500 shares available for future grants under its Plan.

     A summary of stock option activity is as follows:



                                                 WEIGHTED AVERAGE   EXERCISABLE   WEIGHTED AVERAGE
                                       OPTIONS    EXERCISE PRICE      OPTIONS      EXERCISE PRICE
                                       -------   ----------------   -----------   ----------------
                                                                      
Outstanding at December 31, 1998.....       --            --              --               --
  Granted............................  304,500        $22.65
                                       -------        ------          ------           ------
Outstanding at December 31, 1999.....  304,500        $22.65              --               --
  Granted............................  110,000        $16.32
  Cancelled..........................  102,800        $22.86
                                       -------        ------          ------           ------
Outstanding at December 31, 2000.....  311,700        $20.35          51,020           $22.53
                                       =======        ======          ======           ======


     Additional information regarding options outstanding as of December 31,
2000, is as follows:



                            WEIGHTED AVERAGE
   RANGE OF                 CONTRACTUAL LIFE    WEIGHTED AVERAGE   EXERCISABLE   WEIGHTED AVERAGE
EXERCISE PRICES   OPTIONS   REMAINING (YEARS)    EXERCISE PRICE      OPTIONS      EXERCISE PRICE
---------------   -------   -----------------   ----------------   -----------   ----------------
                                                                  
$10.00 - $13.00    66,000          9.6               $12.21              --               --
$22.50 - $27.07   245,700          8.6               $22.54          51,020           $22.53
                  -------          ---               ------          ------           ------
$10.00 - $27.07   311,700          8.8               $20.35          51,020           $22.53
                  =======          ===               ======          ======           ======


     The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost has
been recognized in the results of operations for the stock option grants. Had
compensation cost for the Company's stock option plans been determined based on
the fair value at the grant date, amortized over the vesting period, for awards
in 1999 and 2000 consistent with the provisions of SFAS No. 123, the Company's
net income and basic earnings per share would have been reduced to the pro forma
amounts as follows:



                                                           YEAR ENDED DECEMBER 31,
                                                        -----------------------------
                                                         1998       1999       2000
                                                        -------    -------    -------
                                                                     
Net income (loss).....................................  $(1,581)   $(8,045)   $10,109
Pro forma net income (loss)...........................  $(1,581)   $(8,845)   $ 9,262
Pro forma basic and diluted earnings (loss) per
  share...............................................  $ (0.09)   $ (0.44)   $  0.39


     Using the Black-Scholes valuation model, the per share weighted-average
fair value of stock options granted during the years ended December 31, 1999 and
2000 was $11.36 and $9.36, respectively. The pro forma effect on the Company's
net loss and basic and diluted loss per share for 1999 and 2000 is not
representative of the pro forma effect in future years. The fair value of each
option is estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions used for grants made in
1999: dividend yield of 0%; expected volatility of 58.0%; risk-free interest
rate of 5.8%; expected life of 4 years. The following assumptions were made for
grants made in 2000: dividend yield of 0%; expected volatility of 96.0%;
risk-free interest rate of 5.8%; expected life of 4 years. The Black-Scholes
option valuation model was developed for use in estimating the fair value of
traded options. The assumptions used in option valuation models are highly
subjective, particularly the expected stock price volatility of the underlying
stock. Because changes in these subjective input assumptions can materially
affect the fair value estimate, in management's opinion the existing models do
not provide a reliable single measure of the fair value of its employee stock
options.

                                       F-23

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

9. RELATED PARTY TRANSACTIONS

     In January 1998, Parent borrowed $1.5 million from Mr. Epperson pursuant to
a promissory note with a revolving principal amount of up to $2.5 million. In
May 1998, Parent repaid $1.5 million and there was no outstanding balance on the
note as of December 31, 1998. The note was a demand note which bore interest at
floating rate last set at 8%. The note was cancelled in April 1999.

     In December 1998, the Company borrowed $1.8 million from a stockholder
pursuant to a promissory note with a revolving principal amount of up to $2.5
million. The outstanding balance on the note as of December 31, 1998 was $1.8
million (see Note 5). The note was repaid in full and cancelled in April 1999.

     A stockholder's trust owns real estate on which certain assets of two radio
stations are located. One of the stations, KAVC-FM, was sold during 1998. Salem,
in the ordinary course of its business, entered into two separate lease
agreements with this trust. Rental expense included in operating expense for
1998, 1999 and 2000 amounted to $60,000, $48,000 and $49,000, respectively.

     Land and buildings occupied by various Salem radio stations are leased from
the stockholders of Salem. Rental expense under these leases included in
operating expense for 1998, 1999 and 2000 amounted to $1.0 million, $1.4 million
and $1.4 million, respectively.

     In June 1997, the Company entered into a local marketing agreement ("LMA")
with a corporation, Sonsinger, Inc. ("Sonsinger"), owned by two of Salem's
stockholders for radio station KKOL-AM. The stockholders and the Company are
parties to an Option to Purchase Agreement whereunder the Company had been
granted an option to purchase KKOL-AM from the stockholders at any time on or
before December 31, 1999 at a price equal to the lower of the cost of the
station to the stockholders, $1.4 million, and its fair market value as
determined by an independent appraisal. The Company acquired KKOL-AM from
Sonsinger on April 30, 1999 for $1.4 million and associated real estate for
$400,000. Under the LMA, Salem programmed KKOL-AM and sold all the airtime.
Salem retained all of the revenue and incurred all of the expenses related to
the operation of KKOL-AM and incurred approximately $164,000 and $43,000 in 1998
and 1999, respectively, in LMA fees to Sonsinger.

     On August 22, 2000, the Company sold the assets of radio station KLTX-AM,
Los Angeles, CA for $29.5 million to a corporation owned by one of its Board
members, resulting in a gain of $28.8 million.

     On October 5, 2000, the Company acquired the assets of radio station
WGTX-AM, Louisville, KY for $1.8 million from a corporation owned by a relative
of one of its Board members.

     From time to time, the Company rents an airplane and a helicopter from a
company which is owned by one of the principal stockholders. As approved by the
independent members of the Company's board of directors, the Company rents these
aircraft on an hourly basis at below-market rates and uses them for general
corporate needs. Total rental expense for these aircraft for 1998, 1999 and 2000
amounted to approximately $69,000, $156,000 and $149,000, respectively.

10. DEFINED CONTRIBUTION PLAN

     In 1993, the Company established a 401(k) defined contribution plan (the
"Plan"), which covers all eligible employees (as defined in the Plan).
Participants are allowed to make nonforfeitable contributions up to 15% of their
annual salary, but may not exceed the annual maximum contribution limitations
established by the Internal Revenue Service. The Company currently matches 25%
of the amounts contributed by each participant but does not match participants'
contributions in excess of 6% of their compensation per pay period. Prior to
January 1, 1999, the Company matched 10% of the amounts

                                       F-24

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

contributed by each participant but did not match participants' contributions in
excess of 10% of their compensation per pay period. The Company contributed and
expensed $87,000, $237,000 and $320,000 to the Plan in 1998, 1999 and 2000,
respectively.

11. STOCKHOLDERS' EQUITY

     On March 31, 1999, the Company changed its domicile from California to
Delaware (the "Reincorporation"). In conjunction with the Reincorporation, the
Company's capital structure was changed to authorize 80,000,000 shares of Class
A common stock, $0.01 par value, 20,000,000 shares of Class B common stock,
$0.01 par value, and 10,000,000 shares of preferred stock, $0.01 par value. In
the Reincorporation, the previously outstanding 5,553,696 shares of common stock
were converted into 11,107,392 shares of Class A common stock and 5,553,696
shares of Class B common stock.

     In April 1999, the Company filed a registration statement for an initial
public offering (the "Offering") of its Class A common stock with the Securities
and Exchange Commission. In connection with the Offering, the Company's board of
directors approved a 67-for-one stock dividend on the Company's Class A and
Class B common stock. All references in the accompanying financial statements to
Class A and Class B common stock and per share amounts have been retroactively
adjusted to give effect to the stock dividend.

     Holders of Class A common stock are entitled to one vote per share and
holders of Class B common stock are entitled to ten votes per share, except for
specified related party transactions. Holders of Class A common stock and Class
B common stock vote together as a single class on all matters submitted to a
vote of stockholders, except that holders of Class A common stock vote
separately for two independent directors.

     On May 26, 1999, the Company awarded 75,000 shares of Class A common stock
to an officer of the Company. The Company also agreed to pay the individual
federal and state income tax liabilities associated with the stock award. The
Class A common stock award was valued based on the initial public offering price
and along with the compensation resulting from the payment of the individual
federal and state income taxes associated with the award was recognized as
compensation expense of $2.6 million during the year ended December 31, 1999.

     Upon the closing of the Company's initial public offering, the Company
issued 6,720,000 shares of the Company's Class A common stock at $22.50 per
share, generating gross offering proceeds of $151.2 million. After deducting a
$9.6 million underwriting discount and $1.5 million in other related expenses,
the net proceeds to Salem were $140.1 million.

     In addition, two selling stockholders sold 2,940,000 shares of the
Company's Class A common stock (including 1,260,000 shares sold by the
stockholders as a result of the exercise by the managing underwriters of their
over-allotment option subsequent to the initial offering) to the underwriting
syndicate at the same price per share raising gross proceeds of $66.2 million.
After deducting a $4.2 million underwriting discount the net proceeds to the
selling stockholders were $62.0 million. Salem did not receive any monies from
the sale of shares of the Company's Class A common stock by these selling
stockholders.

12. CONSOLIDATING FINANCIAL INFORMATION

     The following is the consolidating information of Salem Communications
Corporation for purposes of presenting the financial position and operating
results of HoldCo as the issuer of the Existing Notes and the New Notes and its
guarantor subsidiaries on a consolidated basis and the financial position and
operating results of the other guarantors, which are consolidated within the
Company. HoldCo is the issuer of the Existing Notes and New Notes. Separate
financial information of HoldCo on an unconsolidated

                                       F-25

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

basis is not presented because HoldCo has substantially no assets, operations or
cash other than its investments in subsidiaries. Each guarantor has given its
full and unconditional guarantee, on a joint and several basis, of indebtedness
under the Existing Notes and the New Notes. HoldCo and AcquisitionCo. are 100%
owned by Salem and HoldCo owns 100% of all of its subsidiaries. All subsidiaries
of HoldCo are guarantors. The net assets of HoldCo are subject to certain
restrictions which, among other things, require HoldCo to maintain certain
financial covenant ratios, and restrict HoldCo and its subsidiaries from
transferring funds in the form of dividends, loans or advances without the
consent of the holders of the Existing Notes and the New Notes. The restricted
net assets of HoldCo as of December 31, 2000 and June 30, 2001 amounted to
$124.7 million and $146.2 million, respectively. Included in other assets of
HoldCo presented in the consolidating balance sheet below is $50.9 million and
$54.9 million of amounts due from Salem and AcquisitionCo as of December 31,
2000 and June 30, 2001, respectively. These amounts include a $48.3 million
promissory note due from Salem which bears interest at 15.8%, accrued interest
receivable on this note and other amounts due from Salem and AcquisitionCo.

                                       F-26

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

                        SALEM COMMUNICATIONS CORPORATION

                       CONSOLIDATING FINANCIAL STATEMENTS



                                                                        AS OF DECEMBER 31, 2000
                                             ------------------------------------------------------------------------------
                                                                              ISSUER AND
                                                    GUARANTORS          GUARANTOR SUBSIDIARIES
                                             ------------------------   ----------------------                    SALEM
                                              SALEM     ACQUISITIONCO         HOLDCO(1)          ADJUSTMENTS   CONSOLIDATED
                                             --------   -------------   ----------------------   -----------   ------------
                                                                                                
BALANCE SHEET
Current assets:
  Cash and equivalents.....................  $    136     $    180             $  3,612           $      --      $  3,928
  Accounts receivable......................        --        1,325               23,804                  --        25,129
  Other receivables........................        --           26                1,204                  --         1,230
  Prepaid expenses.........................        --           39                1,519                  --         1,558
  Due from stockholders....................        --           --                  450                  --           450
  Deferred income taxes....................        --           --                  490               1,760         2,250
                                             --------     --------             --------           ---------      --------
Total current assets.......................       136        1,570               31,079               1,760        34,545
Property, plant, equipment and software,
  net......................................        --          812               68,192                  --        69,004
Intangible assets, net.....................        --       96,273              262,209                  --       358,482
Bond issue costs...........................        --           --                2,396                  --         2,396
Deferred income taxes......................        --           --                5,564              (5,564)           --
Other assets...............................   254,112      (51,774)              57,131            (253,228)        6,241
                                             --------     --------             --------           ---------      --------
Total assets...............................  $254,248     $ 46,881             $426,571           $(257,032)     $470,668
                                             ========     ========             ========           =========      ========
Current liabilities:
  Accounts payable and accrued expenses....  $     --     $     61             $  5,970           $      --      $  6,031
  Accrued compensation and other...........        --            8                3,353                  --         3,361
  Accrued interest.........................        --           --                3,299                  --         3,299
  Deferred subscription revenue............        --           --                1,509                  --         1,509
  Income taxes.............................        --           --                  100                 200           300
  Capital lease obligations................        --           --                   93                  --            93
                                             --------     --------             --------           ---------      --------
Total current liabilities..................        --           69               14,324                 200        14,593
Long-term debt.............................   103,102           --              286,050            (103,102)      286,050
Deferred income taxes......................        --           --                   --              15,279        15,279
Other liabilities..........................       102          300                1,497                (101)        1,798
Stockholders' equity.......................   151,044       46,512              124,700            (169,308)      152,948
                                             --------     --------             --------           ---------      --------
Total liabilities and stockholders'
  equity...................................  $254,248     $ 46,881             $426,571           $(257,032)     $470,668
                                             ========     ========             ========           =========      ========


                                       F-27

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)



                                                                YEAR ENDED DECEMBER 31, 2000
                                       ------------------------------------------------------------------------------
                                                                        ISSUER AND
                                              GUARANTORS          GUARANTOR SUBSIDIARIES
                                       ------------------------   ----------------------                    SALEM
                                        SALEM     ACQUISITIONCO         HOLDCO(1)          ADJUSTMENTS   CONSOLIDATED
                                       --------   -------------   ----------------------   -----------   ------------
                                                                                          
INCOME STATEMENT
Gross broadcasting revenue...........  $     --     $  3,199             $117,587           $    (663)     $120,123
Less agency commissions..............        --          225                9,801                  --        10,026
                                       --------     --------             --------           ---------      --------
Net broadcasting revenue.............        --        2,974              107,786                (663)      110,097
Other media revenue..................        --           --                7,916                  --         7,916
                                       --------     --------             --------           ---------      --------
Total revenue........................        --        2,974              115,702                (663)      118,013

Operating expenses
  Broadcasting operating expenses....        --        1,256               60,121                (663)       60,714
  Other media operating expenses.....        --           --               14,863                  --        14,863
  Corporate expenses.................        --           --               10,457                  --        10,457
  Depreciation and amortization......        --        2,236               23,243                  --        25,479
                                       --------     --------             --------           ---------      --------
Total operating expenses.............        --        3,492              108,684                (663)      111,513
Net operating income (loss)..........        --         (518)               7,018                  --         6,500

Other income (expense)
  Interest income....................        --           30                1,753              (1,249)          534
  Interest expense...................    (3,129)          --              (15,572)              1,249       (17,452)
  Gain (loss) on sale of assets......        --           --               29,567                  --        29,567
  Other expense......................        --           --                 (856)                 (1)         (857)
                                       --------     --------             --------           ---------      --------
Income (loss) before taxes and
  extraordinary item.................    (3,129)        (488)              21,910                  (1)       18,292
Provision (benefit) for income
  taxes..............................    (1,084)        (169)               8,249                  --         6,996
                                       --------     --------             --------           ---------      --------
Income (loss) before extraordinary
  item...............................    (2,045)        (319)              13,661                  (1)       11,296
Extraordinary loss, net of income
  taxes..............................    (1,187)          --                   --                  --        (1,187)
                                       --------     --------             --------           ---------      --------
Net income (loss)....................  $ (3,232)    $   (319)            $ 13,661           $      (1)     $ 10,109
                                       ========     ========             ========           =========      ========


------------------------
(1) Includes financial position and operating results of the other media
    businesses which were distributed to Salem through the Dividend effective
    June 2001.

                                       F-28

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)



                                                                AS OF JUNE 30, 2001
                             -----------------------------------------------------------------------------------------
                                                                         ISSUER AND
                                         GUARANTORS                GUARANTOR SUBSIDIARIES
                             -----------------------------------   ----------------------
                                                         OTHER                                               SALEM
                              SALEM     ACQUISITIONCO    MEDIA             HOLDCO           ADJUSTMENTS   CONSOLIDATED
                             --------   -------------   --------   ----------------------   -----------   ------------
                                                                                        
BALANCE SHEET

Current assets:
  Cash and equivalents.....  $     47     $ 50,649      $    (37)         $  3,420           $      --      $ 54,079
  Accounts receivable......        --        1,110         1,693            21,976                  --        24,779
  Other receivables........        --            2           420               562                  --           984
  Prepaid expenses.........        13           15           305             1,506                  --         1,839
  Due from stockholders....        --           --            --               450                  --           450
  Deferred income taxes....       993           --            --                79                (414)          658
                             --------     --------      --------          --------           ---------      --------
Total current assets.......     1,053       51,776         2,381            27,993                (414)       82,789
Property, plant, equipment
  and software, net........        --        2,970         2,055            73,740                  --        78,765
Intangible assets, net.....        --       45,605         6,937           248,098                  --       300,640
Bond issue costs...........        --           --            --             7,314                  --         7,314
Deferred income taxes......        --           --            --                --                  --            --
Other assets...............   254,126          587          (831)          106,095            (352,440)        7,537
                             --------     --------      --------          --------           ---------      --------
Total assets...............  $255,179     $100,938      $ 10,542          $463,240           $(352,854)     $477,045
                             ========     ========      ========          ========           =========      ========

Current liabilities:
  Accounts payable and
    accrued expenses.......  $     13     $     95      $  1,156          $  5,202           $      --      $  6,466
  Accrued compensation and
    other..................        --          120           239             3,716                  --         4,075
  Accrued interest.........        --           --            --             2,999                  --         2,999
  Deferred subscription
    revenue................        --           --         1,418                --                  --         1,418
  Income taxes.............        (3)          --            --               276                (163)          110
  Current maturities of
    long-term debt.........        --           --            45               625                  --           670
                             --------     --------      --------          --------           ---------      --------
Total current
  liabilities..............        10          215         2,858            12,818                (163)       15,738
Long-term debt.............   107,068       53,381        25,934           303,123            (186,539)      302,967
Deferred income taxes......     7,680           --         1,468                --                 963        10,111
Other liabilities..........       129           --         4,885             1,112              (4,836)        1,290
Stockholders' equity.......   140,292       47,342       (24,603)          146,187            (162,279)      146,939
                             --------     --------      --------          --------           ---------      --------
Total liabilities and
  stockholders' equity.....  $255,179     $100,938      $ 10,542          $463,240           $(352,854)     $477,045
                             ========     ========      ========          ========           =========      ========


                                       F-29

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)



                                                     SIX MONTHS ENDED JUNE 30, 2001 (UNAUDITED)
                               ---------------------------------------------------------------------------------------
                                                                         ISSUER AND
                                          GUARANTORS               GUARANTOR SUBSIDIARIES
                               ---------------------------------   ----------------------
                                                          OTHER                                              SALEM
                                SALEM    ACQUISITIONCO    MEDIA            HOLDCO           ADJUSTMENTS   CONSOLIDATED
                               -------   -------------   -------   ----------------------   -----------   ------------
                                                                                        
INCOME STATEMENT
Gross broadcasting revenue...  $    --      $2,264       $    --          $ 68,026            $  (371)      $69,919
Less agency commissions......       --        (172)           --            (5,772)                --        (5,944)
                               -------      ------       -------          --------            -------       -------
Net broadcasting revenue.....       --       2,092            --            62,254               (371)       63,975
Other media revenue..........       --          --         4,244                --               (176)        4,068
                               -------      ------       -------          --------            -------       -------
Total revenue................       --       2,092         4,244            62,254               (547)       68,043

Operating expenses
  Broadcasting operating
    expenses.................       --       1,247            --            40,107               (263)       41,091
  Other media operating
    expenses.................       --          --         5,085                --                (69)        5,016
  Corporate expenses.........       --         215            --             7,235               (215)        7,235
  Depreciation and
    amortization.............       --       1,169           951            13,113                 --        15,233
                               -------      ------       -------          --------            -------       -------
Total operating expenses.....       --       2,631         6,036            60,455               (547)       68,575
                               -------      ------       -------          --------            -------       -------
Net operating income
  (loss).....................       --        (539)       (1,792)            1,799                 --          (532)

Other income (expense)
  Interest income............       --       1,411            77             5,432             (5,366)        1,554
  Gain (loss) on sale of
    assets...................       --          --           195             2,323                 --         2,518
  Interest expense...........   (4,072)         --        (1,296)          (12,747)             5,366       (12,749)
  Other expense..............        3         (41)          (12)             (112)                --          (162)
                               -------      ------       -------          --------            -------       -------
Income (loss) before taxes
  and extraordinary item.....   (4,069)        831        (2,828)           (3,305)                --        (9,371)
Provision (benefit) for
  income taxes...............       --          --             9            (1,366)            (2,005)       (3,362)
                               -------      ------       -------          --------            -------       -------
Net income (loss)............  $(4,069)     $  831       $(2,837)         $ (1,939)           $ 2,005       $(6,009)
                               =======      ======       =======          ========            =======       =======


13. SUBSEQUENT EVENTS (UNAUDITED)

     On July 2, 2001, SCA acquired the assets of radio station WCLV-FM (now
WFHM-FM), Cleveland, Ohio for $40.5 million.

     On July 2, 2001, HoldCo sold the assets of radio stations WHKK-AM,
Cleveland, Ohio, and WHK-FM, Canton, Ohio for $30.0 million. The net proceeds
have been placed in an account with a qualified intermediary under a like-kind
exchange agreement in order to preserve the ability to effect a tax-deferred
exchange.

     On July 13, 2001, SCA purchased the assets of radio station WVBB-AM (now
WBTK-AM), Richmond, Virginia for $700,000.

     On July 16, 2001, HoldCo purchased the assets of radio station KBZS-AM (now
KSFB-AM), San Francisco, California for $8.5 million.

     In July 2001, HoldCo agreed to acquire the assets of radio station KJUN-FM,
Portland, Oregon, for $35.8 million. It is anticipated that this transaction
will close in the fourth quarter of 2001.

                                       F-30

                        SALEM COMMUNICATIONS CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         (INFORMATION AS OF JUNE 30, 2001 AND FOR THE SIX MONTHS ENDED
                      JUNE 30, 2001 AND 2000 IS UNAUDITED)

     On August 1, 2001, HoldCo purchased the property and building for our
corporate headquarters for $6.6 million.

14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)



                                        MARCH 31             JUNE 30          SEPTEMBER 30         DECEMBER 31
                                    -----------------   -----------------   -----------------   -----------------
                                     1999      2000     1999(1)    2000      1999     2000(2)    1999      2000
                                    -------   -------   -------   -------   -------   -------   -------   -------
                                                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                  
Total revenue.....................  $21,520   $24,400   $22,718   $26,824   $23,100   $29,811   $26,208   $36,979
Net operating income..............    2,936       158       (89)    1,130     2,345     1,569     2,788     3,644
Net income (loss) before
  extraordinary item..............   (1,308)   (1,657)   (3,516)    1,601      (138)   13,786       487    (2,399)
Extraordinary loss................       --        --        --        --    (3,570)       --        --    (1,187)
Net income (loss).................  $(1,308)  $(1,657)  $(3,516)  $ 1,601   $(3,708)  $13,786   $   487   $(3,586)
Basic and diluted earnings (loss)
  per share before extraordinary
  item............................  $ (0.08)  $ (0.07)  $ (0.21)  $  0.07   $ (0.01)  $  0.59   $  0.02   $ (0.10)
Extraordinary loss per share......       --        --        --        --     (0.15)       --        --     (0.05)
Basic and diluted earnings (loss)
  per share.......................  $ (0.08)  $ (0.07)  $ (0.21)  $  0.07   $ (0.16)  $  0.59   $  0.02   $ (0.15)


------------------------------
(1) Includes a charge of $2.6 million ($1.9 million net of tax) related to stock
    and related cash award made during the quarter.

(2) Includes a gain of $28.8 million on the sale of the assets of radio station
    KLTX-AM, Los Angeles, CA to a corporation owned by one of its Board members.

                                       F-31


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

ALL TENDERED OLD NOTES, EXECUTED LETTERS OF TRANSMITTAL AND OTHER RELATED
DOCUMENTS SHOULD BE DIRECTED TO THE EXCHANGE AGENT. QUESTIONS AND REQUESTS FOR
ADDITIONAL COPIES OF THIS PROSPECTUS, THE LETTER OF TRANSMITTAL AND OTHER
RELATED DOCUMENTS SHOULD BE ADDRESSED TO THE EXCHANGE AGENT AS FOLLOWS:

                         By Hand, Overnight Courier or
                      Registered/Certified Mail Delivery:

                              The Bank of New York
                               101 Barclay Street
                              Bond Redemption Unit
                                  Lobby Level
                               New York, NY 10286

                                 By U.S. Mail:

                              The Bank of New York
                                 P.O. Box 11265
                             Church Street Station
                         Fiscal Agencies Dept. 101B 7E
                               New York, NY 10286

                          Attention: Carolle Montreuil

                                 By Facsimile:
                                 (212) 815-6339
                           -------------------------

                             Confirm by Telephone:
                                 (212) 815-5920
                           -------------------------

    (ORIGINALS OF ALL DOCUMENTS SUBMITTED BY FACSIMILE SHOULD BE SENT PROMPTLY
BY HAND, OVERNIGHT COURIER, OR REGISTERED OR CERTIFIED MAIL)
    NO BROKER DEALER OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFER
MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED
IN THIS PROSPECTUS AND, IF GIVEN OR MADE, THE UNAUTHORIZED INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY NOR DOES IT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
    UNTIL ____________ , 2001 (90 DAYS FROM THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THIS EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
                           -------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
                           -------------------------

                                   PROSPECTUS
                           -------------------------
                                  $150,000,000

                SALEM(TM) LOGO
                    SALEM COMMUNICATIONS HOLDING CORPORATION
                               OFFER TO EXCHANGE
                                ALL OUTSTANDING
                             9% SENIOR SUBORDINATED
                                 NOTES DUE 2011
                                      FOR
                             9% SENIOR SUBORDINATED
                            EXCHANGE NOTES DUE 2011
                                           , 2001

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


                                    PART II
                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Each of Salem Holding and Parent is a Delaware corporation and, therefore,
subject to the Delaware General Corporation Law. Subject to certain limitations,
Section 145 of the Delaware General Corporation Law provides in part that a
corporation shall have power to indemnify any person who was or is a party, or
is threatened to be made a party, to any proceeding (other than an action by or
in the right of the corporation) by reason of the fact that such person is or
was a director, officer, employee or agent of the corporation, or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful.

     Each of Salem Holding and Parent's certificate of incorporation and bylaws
contain provisions whereunder it will indemnify each of its officers and
directors (or their heirs, executors or administrators, if applicable) and may
indemnify any of its employees or agents to the fullest extent permitted by
Delaware law. The indemnification provisions in each of Salem Holding and
Parent's certificate of incorporation and bylaws may permit indemnification for
liabilities arising under the Securities Act. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of Salem Holding or Parent pursuant to the
foregoing provisions, or otherwise, it is Salem Holding and Parent's
understanding that in the opinion of the staff of the Commission such
indemnification is against public policy as expressed in the Securities Act, and
is, therefore, unenforceable. Parent maintains insurance on behalf of any person
who is or was a director or officer of Parent in their capacity as such or in a
like capacity with any of Parent's subsidiaries.

     The Guarantors are organized in various jurisdictions. Indemnification of
the Guarantors' directors, officers and agents provided by applicable law, by
each Guarantor's articles or certificates of incorporation, bylaws, by contract
or otherwise are substantially similar to that afforded the directors, officers
and agents of Salem Holding and Parent.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     (a) Exhibits



  EXHIBIT
  NUMBER                         DESCRIPTION OF EXHIBIT
  -------                        ----------------------
           
 1.01         Purchase Agreement, dated June 20, 2001, among Salem
              Holding, the Guarantors, and Deutsche Banc Alex. Brown Inc.,
              J.P. Morgan Securities Inc., Bear, Stearns & Co. Inc., BNY
              Capital Markets, Inc., Credit Suisse First Boston
              Corporation, Fleet Securities, Inc. and Jefferies & Company,
              Inc.*
 1.02         Registration Rights Agreement, dated June 25, 2001, between
              Salem Holding, the Guarantors and the Initial Purchasers
              named therein.(12)
 1.03         Form of Letter of Transmittal.*
 1.04         Form of Notice of Guaranteed Delivery.*
 3.01         Amended and Restated Certificate of Incorporation of Salem
              Communications Corporation, a Delaware corporation.(5)
 3.02         Bylaws of Salem Communications Corporation, a Delaware
              Corporation.(4)
 3.03         Certificate of Formation of Salem Radio Operations, LLC.(11)
 3.04         Operating Agreement of Salem Radio Operations, LLC.(11)
 3.05         Certificate of Formation of Salem Media of Illinois,
              LLC.(11)
 3.06         Operating Agreement of Salem Media of Illinois, LLC.(11)
 3.07         Certificate of Formation of Salem Media of New York,
              LLC.(11)


                                       II-1




  EXHIBIT
  NUMBER                         DESCRIPTION OF EXHIBIT
  -------                        ----------------------
           
 3.08         Operating Agreement of Salem Media of New York, LLC.(11)
 3.09         Certificate of Incorporation of Salem Radio
              Operations -- Pennsylvania, Inc.(11)
 3.10         Bylaws of Salem Radio Operations -- Pennsylvania, Inc.(11)
 3.11         Agreement of Limited Partnership of Inspiration Media of
              Pennsylvania, LP.(11)
 3.12         Certificate of Limited Partnership of Inspiration Media of
              Pennsylvania, LP.(11)
 3.13         Certificate of Amendment to Certificate of Limited
              Partnership of Inspiration Media of Pennsylvania, LP.(11)
 3.14         Certificate of Conversion of OnePlace, Ltd.(11)
 3.15         Certificate of Formation of OnePlace, LLC.(11)
 3.16         Operating Agreement of OnePlace, LLC.(11)
 3.16.01      First Amendment to Limited Liability Company Operating
              Agreement of OnePlace, LLC.(12)
 3.17         Articles of Conversion of Inspiration Media of Texas,
              Inc.(11)
 3.18         Articles of Organization of Inspiration Media of Texas,
              LLC.(11)
 3.19         Operating Agreement of Inspiration Media of Texas, LLC.(11)
 3.20         Certificate of Incorporation of Salem Communications Holding
              Corporation (incorporated by reference to Exhibit 2.01 of
              the previously filed Form 8-K).(9)
 3.21         Bylaws of Salem Communications Holding Corporation
              (incorporated by reference to Exhibit 2.02 of the previously
              filed Form 8-K).(9)
 3.22         Certificate of Incorporation of Salem Communications
              Acquisition Corporation (incorporated by reference to
              Exhibit 2.03 of the previously filed Form 8-K).(9)
 3.23         Bylaws of Salem Communications Acquisition Corporation
              (incorporated by reference to Exhibit 2.04 of the previously
              filed Form 8-K).(9)
 3.24         Certificate of Incorporation of SCA License Corporation
              (incorporated by reference to Exhibit 2.05 of the previously
              filed Form 8-K).(9)
 3.25         Bylaws of SCA License Corporation (incorporated by reference
              to Exhibit 2.06 of the previously filed Form 8-K).(9)
 3.26         Articles of Incorporation of ATEP Radio, Inc. (incorporated
              by reference to Exhibit 3.04 of the previously filed
              Registration Statement on Form S-4).(1)
 3.27         Bylaws of ATEP Radio, Inc. (incorporated by reference to
              Exhibit 3.05 of the previously filed Registration Statement
              on Form S-4).(1)
 3.28         Articles of Incorporation of Bison Media, Inc. (incorporated
              by reference to Exhibit 3.06 of the previously filed
              Registration Statement on Form S-4).(1)
 3.29         Bylaws of Bison Media, Inc. (incorporated by reference to
              Exhibit 3.07 of the previously filed Registration Statement
              on Form S-4).(1)
 3.30         Articles of Incorporation of Caron Broadcasting, Inc.
              (incorporated by reference to Exhibit 3.08 of the previously
              filed Registration Statement on Form S-4).(1)
 3.31         Code of By-laws of Caron Broadcasting, Inc. (incorporated by
              reference to Exhibit 3.09 of the previously filed
              Registration Statement on Form S-4).(1)
 3.32         Charter of CCM Publications, Inc.*
 3.32.01      Articles of Amendment to the Charter of CCM Publications,
              Inc. (evidencing name change to CCM Communications, Inc.)*
 3.33         Bylaws of CCM Publications, Inc.*
 3.34         Articles of Incorporation of Common Ground Broadcasting,
              Inc. (incorporated by reference to Exhibit 3.10 of the
              previously filed Registration Statement on Form S-4).(1)
 3.35         Bylaws of Common Ground Broadcasting, Inc. (incorporated by
              reference to Exhibit 3.11 of the previously filed
              Registration Statement on Form S-4).(1)
 3.36         Articles of Incorporation of Golden Gate Broadcasting
              Company, Inc. (incorporated by reference to Exhibit 3.12 of
              the previously filed Registration Statement on Form S-4).(1)
 3.37         Bylaws of Golden Gate Broadcasting Company, Inc.
              (incorporated by reference to Exhibit 3.13 of the previously
              filed Registration Statement on Form S-4).(1)


                                       II-2




  EXHIBIT
  NUMBER                         DESCRIPTION OF EXHIBIT
  -------                        ----------------------
           
 3.38         Articles of Incorporation of Inland Radio, Inc.
              (incorporated by reference to Exhibit 3.14 of the previously
              filed Registration Statement on Form S-4).(1)
 3.39         Bylaws of Inland Radio, Inc., a California Corporation
              (incorporated by reference to Exhibit 3.15 of the previously
              filed Registration Statement on Form S-4).(1)
 3.40         Articles of Incorporation of Inspiration Media, Inc.
              (incorporated by reference to Exhibit 3.16 of the previously
              filed Registration Statement on Form S-4).(1)
 3.41         Bylaws of Inspiration Media, Inc. (incorporated by reference
              to Exhibit 3.17 of the previously filed Registration
              Statement on Form S-4).(1)
 3.42         Articles of Incorporation of Kingdom Direct, Inc.*
 3.43         Bylaws of Kingdom Direct, Inc.*
 3.44         Articles of Organization of New England Continental Media
              Inc. (incorporated by reference to Exhibit 3.20 of the
              previously filed Registration Statement on Form S-4).(1)
 3.45         By-laws of New England Continental Media Inc. (incorporated
              by reference to Exhibit 3.21 of the previously filed
              Registration Statement on Form S-4).(1)
 3.46         Articles of Incorporation of Inspirational Media of Southern
              California, Inc. (incorporated by reference to Exhibit
              3.22.01 of the previously filed Registration Statement on
              Form S-4).(1)
 3.47         Certificate of Ownership of Inspirational Media of Southern
              California, Inc. (evidencing merger of New Inspiration
              Broadcasting Company, Inc. with and into the corporation and
              revision of articles to adopt the name New Inspiration
              Broadcasting Company, Inc.) (incorporated by reference to
              Exhibit 3.22.03 of the previously filed Registration
              Statement on Form S-4).(1)
 3.48         Bylaws of Inspirational Media of Southern California, Inc.
              (see Exhibit 3.47 for name change to New Inspiration
              Broadcasting Company, Inc.) (incorporated by reference to
              Exhibit 3.23 of the previously filed Registration Statement
              on Form S-4).(1)
 3.49         Articles of Incorporation of Oasis Radio, Inc. (incorporated
              by reference to Exhibit 3.24 of the previously filed
              Registration Statement on Form S-4).(1)
 3.50         Bylaws of Oasis Radio, Inc. (incorporated by reference to
              Exhibit 3.25 of the previously filed Registration Statement
              on Form S-4).(1)
 3.51         Articles of Incorporation of Pennsylvania Media Associates,
              Inc. (incorporated by reference to Exhibit 3.26 of the
              previously filed Registration Statement on Form S-4).(1)
 3.52         Pennsylvania Media Associates, Inc. By-laws (incorporated by
              reference to Exhibit 3.27 of the previously filed
              Registration Statement on Form S-4).(1)
 3.53         Articles of Incorporation of Radio 1210, Inc. (incorporated
              by reference to Exhibit 3.28 of the previously filed
              Registration Statement on Form S-4).(1)
 3.54         Bylaws of Radio 1210, Inc. (incorporated by reference to
              Exhibit 3.29 of the previously filed Registration Statement
              on Form S-4).(1)
 3.55         Charter of Reach Satellite Network, Inc.*
 3.56         Bylaws of Reach Satellite Network, Inc.*
 3.57         Certificate of Incorporation of Salem Media Corporation
              (incorporated by reference to Exhibit 3.32 of the previously
              filed Registration Statement on Form S-4).(1)
 3.58         By-laws of Salem Media Corporation (incorporated by
              reference to Exhibit 3.33 of the previously filed
              Registration Statement on Form S-4).(1)
 3.59         Articles of Incorporation of Salem Media of Colorado, Inc.
              (incorporated by reference to Exhibit 3.36 of the previously
              filed Registration Statement on Form S-4).(1)
 3.60         Bylaws of Salem Media of Colorado, Inc. (incorporated by
              reference to Exhibit 3.37 of the previously filed
              Registration Statement on Form S-4).(1)
 3.61         Certificate of Incorporation of Salem Media of Georgia,
              Inc.*
 3.62         Bylaws of Salem Media of Georgia, Inc.*
 3.63         Certificate of Incorporation of Salem Media of Hawaii, Inc.*
 3.64         Bylaws of Salem Media of Hawaii, Inc.*
 3.65         Certificate of Incorporation of Salem Media of Kentucky,
              Inc.*
 3.66         Bylaws of Salem Media of Kentucky, Inc.*


                                       II-3




  EXHIBIT
  NUMBER                         DESCRIPTION OF EXHIBIT
  -------                        ----------------------
           
 3.67         Articles of Incorporation of Salem Media of Ohio, Inc.
              (incorporated by reference to Exhibit 3.40 of the previously
              filed Registration Statement on Form S-4).(1)
 3.68         Code of By-laws For the Government of the Board of Directors
              of Salem Media of Ohio, Inc. (incorporated by reference to
              Exhibit 3.41 of the previously filed Registration Statement
              on Form S-4).(1)
 3.69         Articles of Incorporation of Salem Media of Oregon, Inc.
              (incorporated by reference to Exhibit 3.42 of the previously
              filed Registration Statement on Form S-4).(1)
 3.70         Bylaws of Salem Media of Oregon, Inc. (incorporated by
              reference to Exhibit 3.43 of the previously filed
              Registration Statement on Form S-4).(1)
 3.71         Articles of Incorporation of Salem Media of Pennsylvania,
              Inc. (incorporated by reference to Exhibit 3.44 of the
              previously filed Registration Statement on Form S-4).(1)
 3.72         Salem Media of Pennsylvania, Inc. By-laws(incorporated by
              reference to Exhibit 3.45 of the previously filed
              Registration Statement on Form S-4).(1)
 3.73         Articles of Incorporation of Salem Media of Texas, Inc.
              (incorporated by reference to Exhibit 3.46 of the previously
              filed Registration Statement on Form S-4).(1)
 3.74         Bylaws of Salem Media of Texas, Inc. (incorporated by
              reference to Exhibit 3.47 of the previously filed
              Registration Statement on Form S-4).(1)
 3.75         Articles of Incorporation of Salem Media of Virginia, Inc.*
 3.76         Bylaws of Salem Media of Virginia, Inc.*
 3.77         Articles of Incorporation of Salem Music Network, Inc.
              (incorporated by reference to Exhibit 3.48 of the previously
              filed Registration Statement on Form S-4).(1)
 3.78         Bylaws of Salem Music Network, Inc. (incorporated by
              reference to Exhibit 3.49 of the previously filed
              Registration Statement on Form S-4).(1)
 3.79         Certificate of Incorporation of Salem Radio Network
              Incorporated (incorporated by reference to Exhibit 3.50 of
              the previously filed Registration Statement on Form S-4).(1)
 3.80         Salem Radio Network Incorporated Bylaws (incorporated by
              reference to Exhibit 3.51 of the previously filed
              Registration Statement on Form S-4).(1)
 3.81         Certificate of Incorporation of Salem Radio Properties,
              Inc.*
 3.82         Bylaws of Salem Radio Properties, Inc.*
 3.83         Articles of Incorporation of Salem Radio Representatives,
              Inc.(incorporated by reference to Exhibit 3.52 of the
              previously filed Registration Statement on Form S-4).(1)
 3.83.01      Amendment to the Articles of Incorporation of Salem Radio
              Representatives, Inc.*
 3.84         Bylaws of Salem Radio Representatives, Inc.(incorporated by
              reference to Exhibit 3.53 of the previously filed
              Registration Statement on Form S-4).(1)
 3.85         Articles of Incorporation of South Texas Broadcasting, Inc.
              (incorporated by reference to Exhibit 3.54 of the previously
              filed Registration Statement on Form S-4).(1)
 3.86         Bylaws of South Texas Broadcasting, Inc. (incorporated by
              reference to Exhibit 3.55 of the previously filed
              Registration Statement on Form S-4).(1)
 3.87         Articles of Incorporation of SRN News Network, Inc.
              (incorporated by reference to Exhibit 3.56 of the previously
              filed Registration Statement on Form S-4).(1)
 3.88         Bylaws of SRN News Network, Inc. (incorporated by reference
              to Exhibit 3.57 of the previously filed Registration
              Statement on Form S-4).(1)
 3.89         Articles of Incorporation of Vista Broadcasting, Inc.
              (incorporated by reference to Exhibit 3.58 of the previously
              filed Registration Statement on Form S-4).(1)
 3.90         Bylaws of Vista Broadcasting, Inc. (incorporated by
              reference to Exhibit 3.59 of the previously filed
              Registration Statement on Form S-4).(1)
 4.01         Indenture between Salem Communications Corporation, a
              California corporation, certain named guarantors and The
              Bank of New York, as Trustee, dated as of September 25,
              1997, relating to the 9 1/2% Series A and Series B Senior
              Subordinated Notes due 2007.(1)
 4.02         Form of 9 1/2% Senior Subordinated Note (filed as part of
              Exhibit 4.01).(1)
 4.03         Form of Note Guarantee (filed as part of Exhibit 4.01).(1)


                                       II-4




  EXHIBIT
  NUMBER                         DESCRIPTION OF EXHIBIT
  -------                        ----------------------
           
 4.04         Credit Agreement, dated as of September 25, 1997, among
              Salem, the several Lenders from time to time parties
              thereto, and The Bank of New York, as administrative agent
              for the Lenders (incorporated by reference to Exhibit 4.07
              of the previously filed Registration Statement on Form
              S-4).(1)
 4.05         Borrower Security Agreement, dated as of September 25, 1997,
              by and between Salem and The Bank of New York, as
              Administrative Agent of the Lenders (incorporated by
              reference to Exhibit 4.07 of the previously filed
              Registration Statement on Form S-4).(1)
 4.06         Subsidiary Guaranty and Security Agreement dated as of
              September 25, 1997, by and between Salem, certain named
              guarantors, and The Bank of New York, as Administrative
              Agent (incorporated by reference to Exhibit 4.09 of the
              previously filed Registration Statement on Form S-4).(1)
 4.07         Amendment No. 1 and Consent No. 1, dated as of August 5,
              1998, to the Credit Agreement, dated as of September 25,
              1997, by and among Salem, The Bank of New York, as
              Administrative Agent for the Lenders, Bank of America NT&SA,
              as documentation agent, and the several Lenders
              (incorporated by reference to Exhibit 10.02 of previously
              filed Current Report on Form 8-K).(2)
 4.08         Amendment No. 2 and Consent No. 2, dated as of January 22,
              1999, to the Credit Agreement, dated as of September 25,
              1997, by and among Salem, The Bank of New York, as
              Administrative Agent for the Lenders, Bank of America NT&SA,
              as documentation agent, and the Lenders.(3)
 4.09         Specimen of Class A common stock certificate.(5)
 4.10         Supplemental Indenture No. 1, dated as of March 31, 1999, to
              the Indenture, dated as of September 25, 1997, by and among
              Salem Communications Corporation, a California corporation,
              Salem Communications Corporation, a Delaware corporation,
              The Bank of New York, as Trustee, and the Guarantors named
              therein.(5)
 4.10.01      Supplemental Indenture No. 2, dated as of August 24, 2000,
              by and among Salem Communications Corporation, a Delaware
              corporation, Salem Communications Holding Corporation, a
              Delaware corporation, the guarantors named therein and The
              Bank of New York, as Trustee (previously filed as Exhibit
              4.11).(9)
 4.10.02      Supplemental Indenture No. 3, dated as of March 9, 2001, by
              and among Salem Communications Holding Corporation, a
              Delaware corporation, the guarantors named therein and The
              Bank of New York, as Trustee.(11)
 4.10.03      Supplemental Indenture No. 4, dated as of June 25, 2001, by
              and among Salem Communications Holding Corporation, a
              Delaware corporation, the guarantors named therein and The
              Bank of New York, as Trustee.(12)
 4.11         Consent No. 3, dated as of March 31, 1999, to the Credit
              Agreement, dated as of September 25, 1997, by and among
              Salem, The Bank of New York, as Administrative Agent for the
              Lenders, Bank of America NT&SA, as Documentation Agent, and
              the Lenders named therein.(5)
 4.12         Assumption Agreement, dated as of March 31, 1999, by and
              between Salem Communications Corporation, a Delaware
              corporation, and The Bank of New York, as Administrative
              Agent.(5)
 4.13         Amendment No. 1 to the Grant of Security Interest
              (Servicemarks) by Salem to The Bank of New York, as
              Administrative Agent, under the Borrower Security Agreement,
              dated as of September 25, 1997, with the Administrative
              Agent.(5)
 4.14         Amendment No. 3 and Consent No. 4, dated as of April 23,
              1999, under the Credit Agreement, dated as of September 25,
              1997, by and among Salem, The Bank of New York, as
              Administrative Agent for the Lenders, Bank of America NT&SA,
              as Documentation Agent, and the Lenders party thereto.(5)
 4.15         First Amended and Restated Credit Agreement by and among
              Salem, The Bank of New York, as Administrative Agent for the
              Lenders, Bank of America NT&SA, as Documentation Agent, and
              the Lenders named therein.(5)


                                       II-5




  EXHIBIT
  NUMBER                         DESCRIPTION OF EXHIBIT
  -------                        ----------------------
           
 4.16         Amendment No. 1 to First Amended and Restated Credit
              Agreement, by and among Salem, The Bank of New York, as
              Administrative Agent for the Lenders, Bank of America, N.A.,
              as Documentation Agent and the Lenders party thereto.(6)
 4.17         Amendment No. 2 to First Amended and Restated Credit
              Agreement, by and among Salem, The Bank of New York, as
              Administrative Agent for the Lenders, Bank of America, N.A.,
              as Documentation Agent and the Lenders party thereto.(6)
 4.18         Amendment No. 3 to First Amended and Restated Credit
              Agreement, dated as of August 17, 2000, by and among the
              Company, The Bank of New York, as administrative Agent for
              the Lender, Bank of America, N.A., and the Lenders party
              thereto.(9)
 4.19         Second Amended and Restated Credit Agreement, dated as of
              August 24, 2000, by and among Salem Communications Holding
              Corporation, The Bank of New York, as Administrative Agent,
              Bank of America, N.A. as Syndication Agent, Fleet National
              Bank as Documentation Agent, Union Bank of California, N.A.
              and the Bank of Nova Scotia as Co-Agents and the Lenders
              party thereto.(9)
 4.19.01      Supplement to Second Amended and Restated Subsidiary
              Guaranty dated November 7, 2000 by Salem Communications
              Acquisition Corporation and The Bank of New York.(11)
 4.19.02      Supplement to Second Amended and Restated Subsidiary
              Guaranty dated November 7, 2000 by SCA License Corporation
              and The Bank of New York.(11)
 4.20         Credit Agreement dated as of August 24, 2000, by and among
              the Company, ING (U.S.) Capital LLC as Administrative Agent,
              The Bank of New York as Syndication Agent, Fleet National
              Bank as Documentation Agent, and the Lenders party
              thereto.(9)
 4.21         Amendment No. 1, dated as of January 15, 2001, to the Third
              Amended and Restated Credit Agreement, dated as of November
              7, 2000, by and among Salem Communications Corporation, a
              Delaware Corporation; The Bank of New York, as
              Administrative Agent; Bank Of America, N.A., as Syndication
              Agent; Fleet National Bank, as Documentation Agent; Union
              Bank of California, N.A. and The Bank of Nova Scotia, as
              Co-Agents; and Lenders.(10)
 4.22         Amendment No. 1, dated as of January 15, 2001, to the First
              Amended and Restated Parent Guaranty, dated as of November
              7, 2000, by and among Salem Communications Corporation, a
              Delaware corporation, Salem Communications Holding
              Corporation, a Delaware corporation, and The Bank of New
              York, as Administrative Agent.(10)
 4.23         Third Amended and Restated Credit Agreement dated as of
              November 7, 2000, by and among Salem Communications Holding
              Corporation, a Delaware corporation, The Bank of New York,
              as Administrative Agent, Bank of America, N.A., as
              Syndication Agent, Fleet National Bank as Documentation
              Agent, Union Bank of California, N.A. and The Bank of Nova
              Scotia, as Co-agents and lenders.(10)
 4.24         Fourth Amended and Restated Credit Agreement dated as of
              June 15, 2001, by and among Salem Communications Holding
              Corporation, a Delaware corporation, The Bank of New York,
              as Administrative Agent, Bank of America, N.A., as
              Syndication Agent, Fleet National Bank as Documentation
              Agent, Union Bank of California, N.A. and The Bank of Nova
              Scotia, as Co-agents and lenders.(12)
 4.24.01      First Amended and Restated Parent Security Agreement dated
              as of June 15, 2001, by and among Salem Communications
              Corporation, a Delaware corporation, and The Bank of New
              York, as Administrative Agent.(12)
 4.24.02      Second Amended and Restated Parent Security Agreement dated
              as of June 15, 2001, by and among Salem Communications
              Corporation, a Delaware corporation, Salem Communications
              Holding Corporation, a Delaware corporation, and The Bank of
              New York, as Administrative Agent.(12)
 4.25         Indenture between Salem Communications Holding Corporation,
              a Delaware corporation, certain named guarantors and The
              Bank of New York, as Trustee, dated as of June 25, 2001,
              relating to the 9% Series A and Series B Senior Subordinated
              Notes due 2011.(12)
 4.26         Form of Series B 9% Senior Subordinated Note (filed as part
              of Exhibit 4.25).(12)
 4.27         Form of Note Guarantee (filed as part of Exhibit 4.25).(12)


                                       II-6





  EXHIBIT
  NUMBER                         DESCRIPTION OF EXHIBIT
  -------                        ----------------------
           
 4.28         Registration Rights Agreement dated as of June 25, 2001, by
              and among Salem Communications Holding Corporation, the
              Guarantors and Initial Purchasers named therein (filed as
              Exhibit 1.02).(12)
 4.29         Letter of Transmittal (filed as Exhibit 1.03).
 4.30         Notice of Guaranteed Delivery (filed as Exhibit 1.04).
 5.01         Opinion and Consent of Gibson, Dunn & Crutcher LLP regarding
              validity and enforceability of the exchange notes and
              guarantees.+
10.01         Employment Agreement, dated July 1, 2001 between Salem
              Communications Holding Corporation and Edward G. Atsinger
              III (incorporated by reference to Exhibit 10.01.02 of the
              previously filed Quarterly Report on Form 10-Q).(12)
10.01.01      Promissory Note from Edward G. Atsinger III to Salem dated
              December 31, 2000.(11)
10.02         Employment Agreement, dated July 1, 2001 between Salem
              Communications Holding Corporation and Stuart W. Epperson
              (incorporated by reference to Exhibit 10.02.01 of the
              previously filed Quarterly Report on Form 10-Q).(12)
10.03.01      Consulting Agreement dated August 7, 2000, between Salem and
              Eric H. Halvorson (incorporated by reference to Exhibit
              10.03.06 of the previously filed Quarterly Report on Form
              10-Q).(11)
10.03.02      Consulting Agreement dated as of August 15, 2001, between
              Salem Communications Holding Corporation and Eric H.
              Halvorson.*
10.05.01      Antenna/tower lease between Caron Broadcasting, Inc.
              (WHLO-AM/Akron, Ohio) and Messrs. Atsinger and Epperson
              expiring 2007.(1)
10.05.02      Antenna/tower/studio lease between Caron Broadcasting, Inc.
              (WTSJ-AM/Cincinnati, Ohio) and Messrs. Atsinger and Epperson
              expiring 2007.(1)
10.05.03      Antenna/tower lease between Caron Broadcasting, Inc.
              (WHK-FM/Canton, Ohio) and Messrs. Atsinger and Epperson
              expiring 2007.(1)
10.05.04      Antenna/tower/studio lease between Common Ground
              Broadcasting, Inc. (KKMS-AM/ Eagan, Minnesota) and Messrs.
              Atsinger and Epperson expiring in 2006.(1)
10.05.05      Antenna/tower lease between Common Ground Broadcasting, Inc.
              (WHK-AM/Cleveland, Ohio) and Messrs. Atsinger and Epperson
              expiring 2008.(1)
10.05.06      Antenna/tower lease (KFAX-FM/Hayward, California) and Salem
              Broadcasting Company, a partnership consisting of Messrs.
              Atsinger and Epperson, expiring in 2003.(1)
10.05.07      Antenna/tower/studio lease between Inland Radio, Inc.
              (KKLA-AM/San Bernardino, California) and Messrs. Atsinger
              and Epperson expiring 2002.(1)
10.05.08      Antenna/tower lease between Inspiration Media, Inc.
              (KGNW-AM/Seattle, Washington) and Messrs. Atsinger and
              Epperson expiring in 2002.(1)
10.05.09      Antenna/tower lease between Inspiration Media, Inc.
              (KLFE-AM/Seattle, Washington) and The Atsinger Family Trust
              and Stuart W. Epperson Revocable Living Trust expiring in
              2004.(1)
10.05.11.01   Antenna/tower/studio lease between Pennsylvania Media
              Associates, Inc. (WZZD-AM/ WFIL-AM/Philadelphia,
              Pennsylvania) and Messrs. Atsinger and Epperson, as assigned
              from WEAZ-FM Radio, Inc., expiring 2004.(1)
10.05.11.02   Antenna/tower/studio lease between Pennsylvania Media
              Associates, Inc. (WZZD-AM/ WFIL-AM/Philadelphia,
              Pennsylvania) and The Atsinger Family Trust and Stuart W.
              Epperson Revocable Living Trust expiring 2004.(1)
10.05.12      Antenna/tower lease between Radio 1210, Inc.
              (KPRZ-AM/Olivenhain, California) and The Atsinger Family
              Trust expiring in 2002.(1)
10.05.13      Antenna/tower lease between Salem Media of Texas, Inc. and
              Atsinger Family Trust/ Epperson Family Limited Partnership
              (KSLR-AM/San Antonio, Texas).(6)
10.05.14      Antenna/turner/studio leases between Salem Media Corporation
              (KLTX-AM/Long Beach and Paramount, California) and Messrs.
              Atsinger and Epperson expiring in 2002.(1)
10.05.15      Antenna/tower lease between Salem Media of Colorado, Inc.
              (KNUS-AM/Denver-Boulder, Colorado) and Messrs. Atsinger and
              Epperson expiring 2006.(1)



                                       II-7




  EXHIBIT
  NUMBER                         DESCRIPTION OF EXHIBIT
  -------                        ----------------------
           
10.05.16      Antenna/tower lease between Salem Media of Colorado, Inc.
              and Atsinger Family Trust/ Epperson Family Limited
              Partnership (KRKS-AM/KBJD-AM/Denver, Colorado).(6)
10.05.17.01   Studio Lease between Salem Media of Oregon, Inc.
              (KPDQ-AM/FM/Portland, Oregon) and Edward G. Atsinger III,
              Mona J. Atsinger, Stuart W. Epperson, and Nancy K. Epperson
              expiring 2002.(1)
10.05.17.02   Antenna/tower lease between Salem Media of Oregon, Inc.
              (KPDQ-AM/FM/Raleigh Hills, Oregon and Messrs. Atsinger and
              Epperson expiring 2002.(1)
10.05.18      Antenna/tower lease between Salem Media of Pennsylvania,
              Inc. (WORD-FM/WPIT-AM/ Pittsburgh, Pennsylvania) and The
              Atsinger Family Trust and Stuart W. Epperson Revocable
              Living Trust expiring 2003.(1)
10.05.19      Antenna/tower lease between Salem Media of Texas, Inc.
              (KSLR-AM/San Antonio, Texas) and Epperson-Atsinger 1983
              Family Trust expiring 2007.(1)
10.05.20      Antenna/tower lease between South Texas Broadcasting, Inc.
              (KENR-AM/Houston-Galveston, Texas) and Atsinger Family Trust
              and Stuart W. Epperson Revocable Living Trust expiring
              2005.(1)
10.05.21      Antenna/tower lease between Vista Broadcasting, Inc.
              (KFIA-AM/Sacramento, California) and The Atsinger Family
              Trust and Stuart W. Epperson Revocable Living Trust expiring
              2006.(1)
10.05.22      Antenna/tower lease between South Texas Broadcasting, Inc.
              (KKHT-FM/Houston-Galveston, Texas) and Sonsinger
              Broadcasting Company of Houston, LP expiring 2008.(3)
10.05.23      Antenna/tower lease between Inspiration Media of Texas, Inc.
              (KTEK-AM/Alvin, Texas) and the Atsinger Family Trust and The
              Stuart W. Epperson Revocable Living Trust expiring 2009.(3)
10.05.24      Antenna/tower lease between Salem Media Corporation
              (WYLL-FM/Arlington Heights, Illinois) and Sonsinger
              Broadcasting Company of Chicago, LP expiring 2009.*
10.06.05      Asset Purchase Agreement dated as of September 30, 1996 by
              and between Infinity Broadcasting Corporation of Dallas and
              Inspiration Media of Texas, Inc. (KEWS, Arlington, Texas;
              KDFX, Dallas, Texas).(1)
10.06.07      Asset Purchase Agreement dated June 2, 1997 by and between
              New England Continental Media, Inc. and Hibernia
              Communications, Inc. (WPZE-AM, Boston, Massachusetts).(1)
10.06.08      Option to Purchase dated as of August 18, 1997 by and
              between Sonsinger, Inc. and Inspiration Media, Inc.
              (KKOL-AM, Seattle, Washington).(1)
10.06.09      Asset Purchase Agreement dated as of April 13, 1998 by and
              between New Inspiration Broadcasting Company and First
              Scientific Equity Devices Trust (KIEV-AM, Glendale,
              California) (incorporated by reference to Exhibit 2.01 of
              the previously filed Current Report on Form 8-K).(2)
10.06.10      Asset Purchase Agreement dated as of April 1, 1999 by and
              between Inspiration Media, Inc. and Sonsinger, Inc.
              (KKOL-AM, Seattle, Washington).(5)
10.07.01      Tower Purchase Agreement dated August 22, 1997 by and
              between Salem and Sonsinger Broadcasting Company of Houston,
              L.P.(1)
10.07.02      Amendment to the Tower Purchase Agreement dated November 10,
              1997 by and between Salem and Sonsinger Broadcasting Company
              of Houston, L.P.(1)
10.07.03      Promissory Note dated November 11, 1997 made by Sonsinger
              Broadcasting Company of Houston, L.P. payable to Salem.(1)
10.07.04      Promissory Note dated December 24, 1997 made by Salem
              payable to Edward G. Atsinger III.(1)
10.07.05      Promissory Note dated December 24, 1997 made by Salem
              payable to Stuart W. Epperson.(1)
10.08.01      Local Marketing Agreement dated August 13, 1999 between
              Concord Media Group, Inc. and Radio 1210, Inc.(6)
10.08.02      Asset Purchase Agreement dated as of August 18, 1999, by and
              between Salem Media of Georgia, Inc. and Genesis
              Communications, Inc. (WNIV-FM, Atlanta, Georgia and WLTA-FM,
              Alpharetta, Georgia.)(6)


                                       II-8




  EXHIBIT
  NUMBER                         DESCRIPTION OF EXHIBIT
  -------                        ----------------------
           
10.08.03      Asset Purchase Agreement dated as of November 29, 1999, by
              and among JW Broadcasting, Inc., Salem Media of Georgia,
              Inc. and Salem Communications Corporation (WGKA-AM, Atlanta,
              Georgia.)(6)
10.08.04      Asset Exchange Agreement dated as of January 19, 2000 by and
              among Bison Media, Inc.; AMFM Texas Broadcasting, LP and
              AMFM Texas Licenses, LP (KSKY-AM, Balch Springs, TX;
              KPRZ-FM, Colorado Springs, CO).(7)
10.08.05      Asset Purchase Agreement dated as of March 6, 2000 by and
              among Salem, Citicasters Co., AMFM Texas Broadcasting, LP;
              AMFM Texas Licenses LP; AMFM Ohio, Inc.; AMFM Radio Licenses
              LLC; Capstar Radio Operating Company and Capstar TX Limited
              Partnership (WBOB-AM, KEZY-AM, KXMX-FM, KDGE-FM, WKNR-AM,
              WRMR-AM, KALC-FM, WYGY-FM).(7)
10.08.06      Asset Exchange Agreement dated as of May 31, 2000 by and
              among Salem; South Texas Broadcasting, Inc.; Cox Radio,
              Inc.; and CXR Holdings, Inc. (WALR-FM, Athens, GA; WSUN-AM,
              Plant City, FL, KLUP-AM, Terrell Hills, TX, KKHT-FM, Conroe,
              TX).(8)
10.08.07      Asset Purchase Agreement dated as of July 2000, by and among
              Salem Media of California and Hi-Favor Broadcasting, LLC
              (KLTX-AM Long Beach, CA).(8)
10.08.08      Asset Purchase Agreement, dated September 2000, by and
              between Salem Communications Acquisition Corporation, a
              Delaware corporation and Emmis Communications Corporation,
              an Indiana corporation (KALC-FM Denver, CO).(10)
10.08.09      Asset Purchase Agreement, dated as of July 2000, by and
              between Truth Broadcasting Corporation, a North Carolina
              corporation, and Salem Media Of Kentucky, Inc., a Kentucky
              corporation (WLKY-AM Louisville, KY).(10)
10.08.10      Asset Purchase Agreement, dated December 2000, by and
              between Carter Broadcasting, Inc. and SCA License
              Corporation, a Delaware corporation (WROL-AM Boston,
              MA).(10)
10.08.11      Asset Purchase Agreement, dated as of November 6, 2000, by
              and among Infinity Broadcasting Corporation of Illinois, a
              Delaware corporation, Infinity Broadcasting Corporation, a
              Delaware corporation, and Salem Communications Corporation,
              a Delaware corporation (WXRT-AM Chicago, IL).(10)
10.08.12      Promissory Note dated November 7, 2000 made by Salem
              Communications Corporation payable to Salem Communications
              Holding Corporation.(10)
10.09.01      Evidence of Key man life insurance policy no. 2256440M
              insuring Edward G. Atsinger III in the face amount of
              $5,000,000.(1)
10.09.02      Evidence of Key man life insurance policy no. 2257474H
              insuring Edward G. Atsinger III in the face amount of
              $5,000,000.(1)
10.09.03      Evidence of Key man life insurance policy no. 2257476B
              insuring Stuart W. Epperson in the face amount of
              $5,000,000.(1)
10.10         1999 Stock Incentive Plan.(5)
10.11         Management Services Agreement by and among Salem and Salem
              Communications Holding Corporation, dated August 25,
              2000.(11)
12.01         Statement re: Computation of Ratio of Earnings to Fixed
              Charges.*
21.01         Subsidiaries of Salem.*
23.01         Consent of Ernst & Young LLP.
23.02         Consent of PricewaterhouseCoopers LLP.
23.03         Consent of Deloitte & Touche LLP.
23.04         Consent of Gibson, Dunn & Crutcher LLP to Salem Holding and
              the Guarantors (included in Exhibit 5.01).
24.01         Powers of Attorney (included on Signature Pages of
              Registration Statement).*
25.01         Statement of Eligibility of Trustee.*


-------------------------
  *  Previously filed.


  + To be filed by amendment.


                                       II-9


 (1) Incorporated by reference to the exhibit of the same number, unless
     otherwise noted, of Salem's Registration Statement on Form S-4 (No.
     333-41733), as amended, as declared effective by the Commission on February
     9, 1998.

 (2) Incorporated by reference to the exhibit of the same number, unless
     otherwise noted, of Salem's Current Report on Form 8-K, filed with the
     Commission on September 4, 1998.

 (3) Incorporated by reference to the exhibit of the same number, unless
     otherwise noted, of Salem's Annual Report on Form 10-K, filed with the
     Commission on March 31, 1999.

 (4) Incorporated by reference to the exhibit of the same number, unless
     otherwise noted, of Salem's Current Report on Form 8-K, filed with the
     Commission on April 14, 1999.

 (5) Incorporated by reference to the exhibit of the same number to the
     Company's Registration Statement on Form S-1 (No. 333-76649) as amended, as
     declared, effective by the Commission on June 30, 1999.

 (6) Incorporated by reference to the exhibit of the same number to Salem's
     Annual Report on Form 10-K, filed with the Commission on March 30, 2000.

 (7) Incorporated by reference to the exhibit of the same number to Salem's
     Quarterly Report on Form 10-Q, filed with the Commission on May 15, 2000.

 (8) Incorporated by reference to the exhibit of the same number to Salem's
     Quarterly Report on Form 10-Q, filed with the Commission on August 15,
     2000.

 (9) Incorporated by reference to the exhibit of the same number, unless
     otherwise noted, to Salem's Current Report on Form 8-K, filed with the
     Commission on September 8, 2000.

(10) Incorporated by reference to the exhibit of the same number to Salem's
     Annual Report on Form 10-K, filed with the Commission on April 2, 2001.

(11) Incorporated by reference to the exhibit of the same number to Salem's
     Quarterly Report on Form 10-Q, filed with the Commission on May 15, 2001.

(12) Incorporated by reference to the exhibit of the same number to Salem's
     Quarterly Report on Form 10-Q, filed with the Schedules and Exchange
     Commission on August 14, 2001.

     (b) Financial Statement Schedules

     The following financial statement schedule is part of this registration
statement on Form S-4.

                        SALEM COMMUNICATIONS CORPORATION

                 SCHEDULE II -- VALUATION & QUALIFYING ACCOUNTS



                                                              ADDITIONS
                                                   --------------------------------         DEDUCTIONS
                                                                CHARGED               ----------------------
                                                    BALANCE     TO COST    CHARGED                  BALANCE
                                                   BEGINNING      AND      TO OTHER    BAD DEBT     AT END
                   DESCRIPTION                     OF PERIOD    EXPENSE    ACCOUNTS   WRITE-OFFS   OF PERIOD
                   -----------                     ---------   ---------   --------   ----------   ---------
                                                                                    
Year Ended December 31, 1998
  Allowance for Doubtful Accounts................   $1,249      $2,087        $--      $(2,474)     $  862
Year Ended December 31, 1999
  Allowance for Doubtful Accounts................      862       2,670        --        (1,779)      1,753
Year Ended December 31, 2000
  Allowance for Doubtful Accounts................    1,753       3,678        --        (1,881)      3,550


                                      II-10


                   REPORT OF INDEPENDENT AUDITORS ON SCHEDULE

     We have audited the consolidated financial statements of Salem
Communications Corporation as of December 31, 1999 and 2000, and for each of the
three years in the period ended December 31, 2000, and have issued our report
thereon dated March 5, 2001 (included elsewhere in this Registration Statement).
Our audits also included the financial statement schedule listed in Item 21(b)
of this Registration Statement. This schedule is the responsibility of the
company's management. Our responsibility is to express an opinion based on our
audits.

     In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.

                                          /s/ Ernst & Young LLP

Woodland Hills, California
March 5, 2001

ITEM 22. UNDERTAKINGS

     (a) The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
Parent's or any subsidiary (as applicable) annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

     (b) The undersigned registrant hereby undertakes:

          (1) To file, during any period in which offers or sales are being
     made, a post-effective amendment to this registration statement:

             (i) To include any prospectus required by Section 10(a)(3) of the
        Securities Act of 1933;

             (ii) To reflect in the prospectus any facts or events arising after
        the effective date of the registration statement (or the most recent
        post-effective amendment thereof) which, individually or in the
        aggregate, represent a fundamental change in the information set forth
        in the registration statement. Notwithstanding the foregoing, any
        increase or decrease in volume of securities offered (if the total
        dollar value of securities offered would not exceed that which was
        registered) and any deviation from the low or high end of the estimated
        maximum offering range may be reflected in the form of prospectus filed
        with the Commission pursuant to Rule 424(b) if, in the aggregate, the
        changes in volume and price represent no more than 20 percent change in
        the maximum aggregate offering price set forth in the "Calculation of
        Registration Fee" table in the effective registration statement.

             (iii) To include any material information with respect to the plan
        of distribution not previously disclosed in the registration statement
        or any material change to such information in the registration
        statement.

          (2) That, for the purpose of determining any liability under the
     Securities Act of 1933, each such post-effective amendment shall be deemed
     to be a new registration statement relating to the securities offered
     therein, and the offering of such securities at that time shall be deemed
     to be the initial bona fide offering thereof.

          (3) To remove from registration by means of a post-effective amendment
     any of the securities being registered which remain unsold at the
     termination of the offering.

                                      II-11


     (c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

     (d) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.

     (e) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.

                                      II-12


                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, the registrant
named below has duly caused this Amendment No. 2 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Camarillo, California on November 2, 2001.


                                          SALEM COMMUNICATIONS HOLDING
                                          CORPORATION

                                          By:                  *
                                            ------------------------------------
                                              Edward G. Atsinger III
                                              President, Chief Executive Officer
                                              and Director


     Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities indicated on November      , 2001.





                       NAME                                                TITLE
                       ----                                                -----
                                                  
                         *                            President, Chief Executive Officer and Director
---------------------------------------------------            (Principal Executive Officer)
              Edward G. Atsinger III

                         *                           Senior Vice President and Chief Financial Officer
---------------------------------------------------            (Principal Financial Officer)
                 David A. R. Evans

                         *                           Vice President, Finance and Accounting (Principal
---------------------------------------------------                 Accounting Officer)
                  Eileen E. Hill

                         *                                               Director
---------------------------------------------------
                Stuart W. Epperson

                         *                                               Director
---------------------------------------------------
                 Eric H. Halvorson

                         *                                               Director
---------------------------------------------------
                  Roland S. Hinz

                         *                                               Director
---------------------------------------------------
                  Donald P. Hodel

                         *                                               Director
---------------------------------------------------
                 Richard A. Riddle

                                                                         Director
---------------------------------------------------
                  David Davenport




* Jonathan L. Block, by signing his name hereto, does sign this document on
  behalf of each of the persons indicated above pursuant to powers of attorney
  duly executed by such persons and filed with the Securities and Exchange
  Commission.



By:   /s/  JONATHAN L. BLOCK

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

           Jonathan L. Block

           Attorney-in-Fact

                                       S-1


                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, the registrant
named below has duly caused this Amendment No. 2 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Camarillo, California on November 2, 2001.


                                          SALEM COMMUNICATIONS CORPORATION

                                          By:                  *
                                            ------------------------------------
                                              Edward G. Atsinger III
                                              President, Chief Executive Officer
                                              and Director


     Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities indicated on November      , 2001.





                       NAME                                                TITLE
                       ----                                                -----
                                                  
                         *                            President, Chief Executive Officer and Director
---------------------------------------------------            (Principal Executive Officer)
              Edward G. Atsinger III

                         *                           Senior Vice President and Chief Financial Officer
---------------------------------------------------            (Principal Financial Officer)
                 David A. R. Evans

                         *                           Vice President, Finance and Accounting (Principal
---------------------------------------------------                 Accounting Officer)
                  Eileen E. Hill

                         *                                               Director
---------------------------------------------------
                Stuart W. Epperson

                         *                                               Director
---------------------------------------------------
                 Eric H. Halvorson

                         *                                               Director
---------------------------------------------------
                  Roland S. Hinz

                         *                                               Director
---------------------------------------------------
                  Donald P. Hodel

                         *                                               Director
---------------------------------------------------
                 Richard A. Riddle

                                                                         Director
---------------------------------------------------
                  David Davenport




* Jonathan L. Block, by signing his name hereto, does sign this document on
  behalf of each of the persons indicated above pursuant to powers of attorney
  duly executed by such persons and filed with the Securities and Exchange
  Commission.



By:   /s/  JONATHAN L. BLOCK

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

           Jonathan L. Block

           Attorney-in-Fact

                                       S-2


                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, the registrants
named below have duly caused this Amendment No. 2 to the Registration Statement
to be signed on their behalf by the undersigned, thereunto duly authorized, in
Camarillo, California on November 2, 2001.


                                  ATEP RADIO, INC.
                                  BISON MEDIA, INC.
                                  CARON BROADCASTING, INC.
                                  CCM COMMUNICATIONS, INC.
                                  COMMON GROUND BROADCASTING, INC.
                                  GOLDEN GATE BROADCASTING COMPANY, INC.
                                  INLAND RADIO, INC.
                                  INSPIRATION MEDIA, INC.
                                  KINGDOM DIRECT, INC.
                                  NEW ENGLAND CONTINENTAL MEDIA, INC.
                                  NEW INSPIRATION BROADCASTING COMPANY, INC.
                                  PENNSYLVANIA MEDIA ASSOCIATES, INC.
                                  RADIO 1210, INC.
                                  REACH SATELLITE NETWORK, INC.
                                  SALEM COMMUNICATIONS ACQUISITION CORPORATION
                                  SALEM MEDIA CORPORATION
                                  SALEM MEDIA OF COLORADO, INC.
                                  SALEM MEDIA OF GEORGIA, INC.
                                  SALEM MEDIA OF HAWAII, INC.
                                  SALEM MEDIA OF KENTUCKY, INC.
                                  SALEM MEDIA OF OHIO, INC.
                                  SALEM MEDIA OF OREGON, INC.
                                  SALEM MEDIA OF PENNSYLVANIA, INC.
                                  SALEM MEDIA OF TEXAS, INC.
                                  SALEM MEDIA OF VIRGINIA, INC.
                                  SALEM MUSIC NETWORK, INC.
                                  SALEM RADIO NETWORK INCORPORATED
                                  SALEM RADIO OPERATIONS -- PENNSYLVANIA, INC.
                                  SALEM RADIO PROPERTIES, INC.
                                  SALEM RADIO REPRESENTATIVES, INC.
                                  SCA LICENSE CORPORATION
                                  SOUTH TEXAS BROADCASTING, INC.
                                  SRN NEWS NETWORK, INC.
                                  VISTA BROADCASTING, INC.

                                  By:                      *
                                     -------------------------------------------
                                      Edward G. Atsinger III
                                      President, Chief Executive Officer and
                                      Director

                                       S-3



     Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities indicated on November 2, 2001.




                      NAME                                               TITLE
                      ----                                               -----
                                               

                       *                                 President and Chief Executive Officer
 ---------------------------------------------               (Principal Executive Officer)
             Edward G. Atsinger III

                       *                           Senior Vice President and Chief Financial Officer
 ---------------------------------------------               (Principal Financial Officer)
               David A. R. Evans

                       *                                Vice President, Finance and Accounting
 ---------------------------------------------              (Principal Accounting Officer)
                 Eileen E. Hill

                       *                                               Director
 ---------------------------------------------
             Edward G. Atsinger III

             /s/ JONATHAN L. BLOCK                                     Director
 ---------------------------------------------
               Jonathan L. Block



* Jonathan L. Block, by signing his name hereto, does sign this document on
  behalf of each of the persons indicated above pursuant to powers of attorney
  duly executed by such persons and filed with the Securities and Exchange
  Commission.



By:   /s/  JONATHAN L. BLOCK

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

           Jonathan L. Block

           Attorney-in-Fact

                                       S-4


                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, the registrant
named below has duly caused this Amendment No. 2 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Camarillo, California on November 2, 2001.


                                          INSPIRATION MEDIA OF
                                          PENNSYLVANIA, L.P.

                                          By: SALEM RADIO OPERATIONS-
                                          PENNSYLVANIA, INC.,
                                          General Partner

                                          By:                  *
                                            ------------------------------------
                                              Edward G. Atsinger III
                                              President, Chief Executive Officer
                                              and Director


     Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities indicated on November      , 2001.




                    NAME                                           TITLE
                    ----                                           -----
                                            
                      *                            President and Chief Executive Officer
---------------------------------------------               of General Partner
           Edward G. Atsinger III                      (Principal Executive Officer)

                      *                          Senior Vice President and Chief Financial
---------------------------------------------           Officer of General Partner
              David A. R. Evans                        (Principal Financial Officer)

                      *                           Vice President, Finance and Accounting
---------------------------------------------               of General Partner
               Eileen E. Hill                         (Principal Accounting Officer)

                      *                                 Director of General Partner
---------------------------------------------
           Edward G. Atsinger III

            /s/ JONATHAN L. BLOCK                       Director of General Partner
---------------------------------------------
              Jonathan L. Block



* Jonathan L. Block, by signing his name hereto, does sign this document on
  behalf of each of the persons indicated above pursuant to powers of attorney
  duly executed by such persons and filed with the Securities and Exchange
  Commission.



By:   /s/  JONATHAN L. BLOCK

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

           Jonathan L. Block

           Attorney-in-Fact

                                       S-5


                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, the registrants
named below have duly caused this Amendment No. 2 to the Registration Statement
to be signed on their behalf by the undersigned, thereunto duly authorized, in
Camarillo, California on November 2, 2001.


                                          INSPIRATION MEDIA OF TEXAS, LLC
                                          SALEM MEDIA OF ILLINOIS, LLC
                                          SALEM MEDIA OF NEW YORK, LLC
                                          SALEM RADIO OPERATIONS, LLC

                                          By: SALEM MEDIA CORPORATION, Manager

                                          By:                  *
                                            ------------------------------------
                                              Edward G. Atsinger III
                                              President, Chief Executive Officer
                                              and Director


     Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities indicated on November      , 2001.




                    NAME                                           TITLE
                    ----                                           -----
                                            
                      *                          President and Chief Executive Officer of
---------------------------------------------                     Manager
           Edward G. Atsinger III                      (Principal Executive Officer)

                      *                          Senior Vice President and Chief Financial
---------------------------------------------               Officer of Manager
              David A. R. Evans                        (Principal Financial Officer)

                      *                          Vice President, Finance and Accounting of
---------------------------------------------                     Manager
               Eileen E. Hill                         (Principal Accounting Officer)

                      *                                     Director of Manager
---------------------------------------------
           Edward G. Atsinger III

            /s/ JONATHAN L. BLOCK                           Director of Manager
---------------------------------------------
              Jonathan L. Block



* Jonathan L. Block, by signing his name hereto, does sign this document on
  behalf of each of the persons indicated above pursuant to powers of attorney
  duly executed by such persons and filed with the Securities and Exchange
  Commission.



By:   /s/  JONATHAN L. BLOCK

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

           Jonathan L. Block

           Attorney-in-Fact

                                       S-6


                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, the registrant
named below has duly caused this Amendment No. 2 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Camarillo, California on November 2, 2001.


                                          ONEPLACE, LLC

                                          By: SALEM COMMUNICATIONS CORPORATION,
                                              Manager

                                          By:                  *
                                            ------------------------------------
                                              Edward G. Atsinger III
                                              President, Chief Executive Officer
                                              and Director


     Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities indicated on November      , 2001.





                        NAME                                               TITLE
                        ----                                               -----
                                                    

                          *                                President, Chief Executive Officer and
-----------------------------------------------------     Director of Manager (Principal Executive
               Edward G. Atsinger III                                     Officer)

                          *                              Senior Vice President and Chief Financial
-----------------------------------------------------     Officer of Manager (Principal Financial
                  David A. R. Evans                                       Officer)

                          *                              Vice President, Finance and Accounting of
-----------------------------------------------------      Manager (Principal Accounting Officer)
                   Eileen E. Hill

                          *                                         Director of Manager
-----------------------------------------------------
                 Stuart W. Epperson

                          *                                         Director of Manager
-----------------------------------------------------
                  Eric H. Halvorson

                          *                                         Director of Manager
-----------------------------------------------------
                   Roland S. Hinz

                          *                                         Director of Manager
-----------------------------------------------------
                   Donald P. Hodel

                          *                                         Director of Manager
-----------------------------------------------------
                  Richard A. Riddle

                                                                    Director of Manager
-----------------------------------------------------
                   David Davenport




* Jonathan L. Block, by signing his name hereto, does sign this document on
  behalf of each of the persons indicated above pursuant to powers of attorney
  duly executed by such persons and filed with the Securities and Exchange
  Commission.



By:   /s/  JONATHAN L. BLOCK

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

           Jonathan L. Block

           Attorney-in-Fact

                                       S-7


                                 EXHIBIT INDEX




      EXHIBIT
PAGE   NUMBER                      DESCRIPTION OF EXHIBIT
----  --------                     ----------------------
          
      1.01      Purchase Agreement, dated June 20, 2001, among Salem
                Holding, the Guarantors, and Deutsche Banc Alex. Brown Inc.,
                J.P. Morgan Securities Inc., Bear, Stearns & Co. Inc., BNY
                Capital Markets, Inc., Credit Suisse First Boston
                Corporation, Fleet Securities, Inc. and Jefferies & Company,
                Inc.*
      1.03      Form of Letter of Transmittal.*
      1.04      Form of Notice of Guaranteed Delivery.*
      3.32      Charter of CCM Publications, Inc.*
      3.32.01   Articles of Amendment to the Charter of CCM Publications,
                Inc. (evidencing name change to CCM Communications, Inc.)*
      3.33      Bylaws of CCM Publications, Inc.*
      3.42      Articles of Incorporation of Kingdom Direct, Inc.*
      3.43      Bylaws of Kingdom Direct, Inc.*
      3.55      Charter of Reach Satellite Network, Inc.*
      3.56      Bylaws of Reach Satellite Network, Inc.*
      3.61      Certificate of Incorporation of Salem Media of Georgia,
                Inc.*
      3.62      Bylaws of Salem Media of Georgia, Inc.*
      3.63      Certificate of Incorporation of Salem Media of Hawaii, Inc.*
      3.64      Bylaws of Salem Media of Hawaii, Inc.*
      3.65      Certificate of Incorporation of Salem Media of Kentucky,
                Inc.*
      3.66      Bylaws of Salem Media of Kentucky, Inc.*
      3.75      Articles of Incorporation of Salem Media of Virginia, Inc.*
      3.76      Bylaws of Salem Media of Virginia, Inc.*
      3.81      Certificate of Incorporation of Salem Radio Properties,
                Inc.*
      3.82      Bylaws of Salem Radio Properties, Inc.*
      3.83.01   Amendment to the Articles of Incorporation of Salem Radio
                Representatives, Inc.*
      4.29      Letter of Transmittal (filed as Exhibit 1.03)
      4.30      Notice of Guaranteed Delivery (filed as Exhibit 1.04)
      5.01      Opinion and Consent of Gibson, Dunn & Crutcher LLP regarding
                validity and enforceability of the exchange notes and
                guarantees.+
      10.03.02  Consulting Agreement dated as of August 15, 2001, between
                Salem Communications Holding Corporation and Eric H.
                Halvorson.*
      10.05.24  Antenna/tower lease between Salem Media Corporation
                (WYLL-FM/Arlington Heights, Illinois) and Sonsinger
                Broadcasting Company of Chicago, LP expiring 2009.*
      12.01     Statement re: Computation of Ratio of Earnings to Fixed
                Charges.*
      21.01     Subsidiaries of Salem.*
      23.01     Consent of Ernst & Young LLP.
      23.02     Consent of PricewaterhouseCoopers LLP.
      23.03     Consent of Deloitte & Touche LLP.
      23.04     Consent of Gibson, Dunn & Crutcher LLP to Salem Holding and
                the Guarantors (included in Exhibit 5.01).
      24.01     Powers of Attorney (included on Signature Pages of
                Registration Statement).*
      25.01     Statement of Eligibility of Trustee.*



------------------------
* Previously filed.


+To be filed by amendment.


                                       E-1

EX-23.1

                                                                   EXHIBIT 23.01

               CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS


     We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4, as amended, dated November 2, 2001) of Salem
Communications Corporation and Salem Communications Holding Corporation for the
registration of $150,000,000 of its 9% Series B Senior Subordinated Notes Due
2011 and the related guarantees and to the use of our reports dated March 5,
2001, with respect to the consolidated financial statements and schedule of
Salem Communications Corporation for the year ended December 31, 2000.


     We also consent to the incorporation by reference therein of our report
dated March 5, 2001, with respect to the consolidated financial statements and
schedule of Salem Communications Corporation included in its Annual Report (Form
10-K) for the year ended December 31, 2000, filed with the Securities and
Exchange Commission.

     We also consent to the incorporation by reference therein of our report
dated November 3, 2000, with respect to the financial statements of Clear
Channel Communication, Inc.'s ratio stations KXMX (FM) and KEZY (AM) as of June
30, 2000 and the twelve months then ended appearing in Salem Communication
Corporation's Form 8-K/A filed on October 16, 2001 with the Securities and
Exchange Commission.

                                          /s/ Ernst & Young LLP

Woodland Hills, California

November 2, 2001

EX-23.2

                                                                   EXHIBIT 23.02

                       CONSENT OF INDEPENDENT ACCOUNTANTS

The Board of Directors of
Salem Communications Holding Corporation:

     We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4/A of Salem Communications Holding Corporation of our
reports dated October 27, 2000 relating to the financial statements of WBOB-AM,
WRMR-AM, and WKNR-AM, which appear in the Current Report on Form 8-K/A of Salem
Communications Corporation dated August 24, 2000. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.

                                          /s/ PricewaterhouseCoopers LLP


November 1, 2001

Dallas, Texas

EX-23.3

                                                                   EXHIBIT 23.03

                         INDEPENDENT AUDITORS' CONSENT


     We consent to the incorporation by reference in this Amendment No. 2 to
Registration Statement No. 333-69122 of Salem Communications Holding Corporation
on Form S-4 of our report, dated October 31, 2000, on the consolidated financial
statements of Sunburst Dallas, LP as of and for the year ended June 30, 2000,
included in the Current Report on Form 8-K/A of Salem Communications Corporation
dated October 16, 2001. We also consent to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.


                                          DELOITTE & TOUCHE LLP

                                               /s/ DELOITTE & TOUCHE LLP


November 2, 2001