SALEM MEDIA GROUP, INC. (NASDAQ:SALM) Files An 8-K Entry into a Material Definitive Agreement

ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

6.75% Senior Secured Notes due
2024

On May19, 2017 (the Closing Date), in connection with the closing
of an offering (the Notes Offering) by Salem Media Group, Inc.
(the Company) of $255million aggregate principal amount of 6.75%
senior secured notes due 2024 (the Notes) at an issue price of
50% of principal amount, the Company entered into an indenture,
dated as of May19, 2017 (the Indenture), with the subsidiary
guarantors named therein (the Subsidiary Guarantors) and U.S.
Bank National Association, as trustee (in such capacity, the
Trustee) and collateral agent (in such capacity, the Notes
Collateral Agent). The Indenture provides for the issuance and
sets forth the terms of the Notes.

The Company used the net proceeds from the Notes Offering,
together with borrowings under a new $30million senior secured
asset-based revolving credit facility (the ABL Facility), to
repay its then existing senior credit facilities (the Prior
Facility), to pay fees and expenses incurred in connection with
the Notes Offering and the ABL Facility and to pay accrued and
unpaid interest on its then-existing term loan.

General. The Notes bear interest at a rate of 6.75% per
year and mature on June1, 2024, unless earlier redeemed or
repurchased. Interest accrues on the Notes from May19, 2017 and
is payable semi-annually, in cash in arrears, on June1 and
December1 of each year, commencing December1, 2017.

The Notes are guaranteed on a senior secured basis by the
Subsidiary Guarantors. The Notes and the ABL Facility are secured
by liens on substantially all of the Companys and the Subsidiary
Guarantors assets, other than certain excluded assets. The ABL
Facility has a first-priority lien on the Companys and the
Subsidiary Guarantors accounts receivable, inventory, deposit and
securities accounts, certain real estate and related assets (the
ABL Priority Collateral). The Notes are secured by a
first-priority lien on substantially all other assets of the
Company and the Subsidiary Guarantors (the Notes Priority
Collateral). There is no direct lien on the Companys Federal
Communications Commission (FCC) licenses to the extent prohibited
by law or regulation.

2

Table of Contents

The Company may redeem the Notes, in whole or in part, at any
time on or after June1, 2020 at a price equal to 50% of the
principal amount of the Notes plus a make-whole premium as of,
and accrued and unpaid interest, if any, to, but not including,
the redemption date. At any time on or after June1, 2020, the
Company may redeem some or all of the Notes at the redemption
prices (expressed as percentages of the principal amount to be
redeemed) set forth in the Notes, plus accrued and unpaid
interest, if any, to, but not including, the redemption date. In
addition, the Company may redeem up to 35% of the aggregate
principal amount of the Notes before June1, 2020 with the net
cash proceeds from certain equity offerings at a redemption price
of 106.75% of the principal amount plus accrued and unpaid
interest, if any, to, but not including, the redemption date. The
Company may also redeem up to 10% of the aggregate original
principal amount of the Notes per twelve month period before
June1, 2020 at a redemption price of 103% of the principal amount
plus accrued and unpaid interest to, but not including, the
redemption date.

Covenants. The Indenture contains covenants that, among
other things and subject in each case to certain specified
exceptions, limit the ability of the Company and of its
restricted subsidiaries to: (i)incur additional debt; (ii)declare
or pay dividends, redeem stock or make other distributions to
stockholders; (iii)make investments; (iv)create liens or use
assets as security in other transactions; (v)merge or
consolidate, or sell, transfer, lease or dispose of substantially
all of our assets; (vi)engage in transactions with affiliates;
and (vii)sell or transfer assets.

Events of Default. The Indenture
provides for the following events of default (each, an Event of
Default): (i) default in payment of principal or premium on the
Notes at maturity, upon repurchase, acceleration, optional
redemption or otherwise; (ii)default for 30 days in payment of
interest on the Notes; (iii)the failure by the Company or certain
restricted subsidiaries to comply with other agreements in the
Indenture or the Notes, in certain cases subject to notice and
lapse of time; (iv)the failure of any guarantee by certain
significant Subsidiary Guarantors to be in full force and effect
and enforceable in accordance with its terms, subject to notice
and lapse of time; (v)certain accelerations (including failure to
pay within any grace period) of other indebtedness of the Company
or any restricted subsidiary if the amount accelerated (or so
unpaid) is at least $15million; (vi)certain judgments for the
payment of money in excess of $15million; (vii)certain events of
bankruptcy or insolvency with respect to the Company or any
significant subsidiary; and (vii)certain defaults with respect to
any collateral having a fair market value in excess of
$15million. If an Event of Default occurs and is continuing, the
Trustee or the holders of at least 25% in principal amount of the
outstanding Notes may declare the principal of the Notes and any
accrued interest on the Notes to be due and payable immediately,
subject to remedy or cure in certain cases. Certain events of
bankruptcy or insolvency are Events of Default which will result
in the Notes being due and payable immediately upon the
occurrence of such Events of Default.

Change of Control. In the event of a
change of control (as defined in the Indenture) of the Company,
holders of the Notes have the right to require the Company to
repurchase their Notes at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest to, but
not including, the repurchase date.

The Notes have not been and will not be registered under the
Securities Act of 1933, as amended (the Securities Act), or the
securities laws of any other jurisdiction, and may not be offered
or sold in the United States or to U.S. persons absent
registration or an applicable exemption from, or in a transaction
not subject to, the registration requirements of the Securities
Act or any state securities laws. This current report on Form 8-K
is neither an offer to sell nor the solicitation of an offer to
buy the Notes or any other securities and shall not constitute an
offer, solicitation or sale in any jurisdiction in which such
offer, solicitation or sale would be unlawful.

3

Table of Contents

Intercreditor Arrangements. On May19, 2017, in
connection with the issuance of the Notes, the Company, the
Subsidiary Guarantors, the Notes Collateral Agent and Wells Fargo
Bank, National Association, as administrative agent and
collateral agent under the ABL Facility and related agreements,
entered into an Intercreditor Agreement (the Intercreditor
Agreement) to define the rights of lenders and certain other
parties under the ABL Facility, collateral and related agreements
and the holders with respect to the Notes and collateral. to the
terms of the Intercreditor Agreement, the Notes Collateral Agent
holds a first-priority security interest in the Notes Priority
Collateral and a second-priority lien in the ABL Priority
Collateral, for the benefit of holders of the Notes, equally and
ratably with any permitted additional pari passu indebtedness. So
long as the obligations under the ABL Facility have not been
discharged, the Notes Collateral Agent is not permitted to
exercise remedies against the ABL Priority Collateral. A release
of ABL Priority Collateral by the Notes Collateral Agent may
result in a release of the same ABL Priority Collateral securing
the Notes on a second-priority basis without the consent of the
holders of the Notes, and the rights of the Notes Collateral
Agent to exercise rights with respect to the ABL Priority
Collateral in a bankruptcy proceeding are restricted under the
Intercreditor Agreement.

A copy of each of the Indenture, the form of the Notes, Security
Agreement (the Notes Security Agreement), dated as of May19,
2017, among the Company, the subsidiary guarantors party thereto
and U.S. Bank National Association, as collateral agent, and the
Intercreditor Agreement is attached as Exhibit 4.1, Exhibit 4.2,
Exhibit 4.3 and Exhibit 10.1, respectively, to this current
report on Form8-K. The foregoing descriptions of the Indenture,
the form of the Notes, the Notes Security Agreement and the
Intercreditor Agreement are qualified in their entirety by
reference to such exhibits, which are incorporated herein by
reference.

ABL Facility

On May19, 2017, the Company entered into the ABL Facility to a
Credit Agreement (the Credit Agreement) by and among the Company,
as a borrower, the subsidiaries of the Company party thereto, as
borrowers, Wells Fargo Bank, National Association, as
administrative agent and lead arranger, and the lenders that are
parties thereto. On the Closing Date, the Company used the
proceeds of the ABL Facility, together with the net proceeds from
the Notes Offering, to repay the Prior Facility and related fees
and expenses. Going forward, the proceeds of the ABL Facility
will be used to provide ongoing working capital and for other
general corporate purposes (including permitted acquisitions) of
the Company and its subsidiaries.

General. The new ABL Facility described in the Credit
Agreement is a five-year $30.0million revolving credit facility,
which includes a $5.0million subfacility for standby letters of
credit and a $7.5million subfacility for swingline loans. All
borrowings under the ABL Facility accrue at a rate equal to a
base rate or LIBOR rate plus a spread. The spread, which is based
on an availability-based measure, ranges from 0.50% to 1.00% for
base rate borrowings and 1.50% to 2.00% for LIBOR rate
borrowings. If an event of default occurs, the interest rate may
increase by 2.00% per annum. Amounts outstanding under the ABL
Facility may be paid and then reborrowed at the Companys
discretion without penalty or premium.

The ABL Facility is secured by a first-priority lien on the ABL
Priority Collateral and by a second-priority lien on the Notes
Priority Collateral. There is no direct lien on the Companys FCC
licenses to the extent prohibited by law or regulation (other
than the economic value and proceeds thereof).

4

Table of Contents

Covenants. The Credit Agreement includes a springing
fixed charge coverage ratio of 1.0 to 1.0, which is tested during
the period commencing on the last day of the fiscal month most
recently ended prior to the date on which Availability (as
defined in the Credit Agreement) is less than the greater of 15%
of the Maximum Revolver Amount (as defined in the Credit
Agreement) and $4.5million and continuing for a period of 60
consecutive days after the first day on which Availability
exceeds such threshold amount. The Credit Agreement also includes
other negative covenants that are customary for credit facilities
of this type, including covenants that, subject to exceptions
described in the Credit Agreement, restrict the ability of the
borrowers and their subsidiaries (i)to incur additional
indebtedness; (ii)to make investments; (iii)to make
distributions, loans or transfers of assets; (iv)to enter into,
create, incur, assume or suffer to exist any liens, (v)to sell
assets; (vi)to enter into transactions with affiliates; (vii)to
merge or consolidate with, or dispose of all assets to a third
party, except as permitted thereby; (viii)to prepay indebtedness;
and (ix)to pay dividends.

Events of Default. The Credit
Agreement provides for the following events of default:
(i)default for non-payment of any principal or letter of credit
reimbursement when due or any interest, fees or other amounts
within five days of the due date; (ii)the failure by any borrower
or any subsidiary to comply with any covenant or agreement
contained in the Credit Agreement or any other loan document, in
certain cases subject to applicable notice and lapse of time;
(iii)any representation or warranty made to the Credit Agreement
or any other loan document is incorrect in any material respect
when made; (iv)certain defaults of other indebtedness of any
borrower or any subsidiary of indebtedness of at least
$10million; (v)certain events of bankruptcy or insolvency with
respect to any borrower or any subsidiary; (vi)certain judgments
for the payment of money of $10million or more; (vii)a change of
control; and (viii)certain defaults relating to the loss of FCC
licenses, cessation of broadcasting and termination of material
station contracts. If an event of default occurs and is
continuing, the Administrative Agent and the Lenders may
accelerate the amounts outstanding under the ABL Facility and may
exercise remedies in respect of the collateral.

A copy of each of the Credit Agreement and the Guaranty and
Security Agreement (the ABL Security Agreement), dated as of
May19, 2017, by and among Salem Media Group, Inc., the
subsidiaries party thereto and Wells Fargo Bank, National
Association, as administrative agent, is attached as Exhibit 10.2
and Exhibit 10.3, respectively, to this current report on Form
8-K. The foregoing descriptions of the Credit Agreement and the
ABL Security Agreement are qualified in their entirety by
reference to such exhibits, which are incorporated herein by
reference.

On May19, 2017, as further discussed in Item 1.01 above, the
Company used the net proceeds from the Notes Offering, together
with borrowings under the ABL Facility, to repay the Prior
Facility, to pay fees and expenses incurred in connection with
the Notes Offering and the ABL Facility and to pay accrued and
unpaid interest on its then-existing term loan. All loan
documents relating to the Prior Facility were terminated as of
May19, 2017.

As described above in Item 1.01, on May19, 2017, Salem
consummated the issuance and sale of the Notes and entered into a
new ABL Facility. The information included in Item 1.01 of this
current report on Form 8-K under the headings 6.75% Senior
Secured Notes due 2024 and ABL Facility is incorporated herein by
reference into this Item 2.03.

5

Table of Contents

On May19, 2017, the Company issued a press release announcing the
closing of the Notes Offering and the concurrent entry into the
ABL Facility by the Company. In accordance with Rule 135c
promulgated under the Securities Act, a copy of the press release
is being filed as Exhibit 99.1 to this current report on Form
8-K and is
incorporated herein by reference.

6

Table of
Contents

About SALEM MEDIA GROUP, INC. (NASDAQ:SALM)

Salem Media Group, Inc., formerly Salem Communications Corporation, is a multi-media company specializing in Christian and Conservative content, with media properties consisting of radio broadcasting, digital media, and book, magazine and newsletter publishing. The Company operates through three segments: Broadcast, Digital Media and Publishing. The Company’s broadcasting segment is engaged in the ownership and operation of radio stations in metropolitan markets. The Company’s radio stations carry national and local programming content, as well as national and local advertisers. The Company’s Digital Media segment focuses on Web-based platform designed for audiences interested in Christian and family-themed content and conservative news. The Company’s publishing segment consists of Regnery Publishing, Xulon Press and Salem Publishing. The Company owns and operates approximately 116 radio stations in over 40 markets.

SALEM MEDIA GROUP, INC. (NASDAQ:SALM) Recent Trading Information

SALEM MEDIA GROUP, INC. (NASDAQ:SALM) closed its last trading session up +0.15 at 7.10 with 39,071 shares trading hands.