EXHIBIT 10.02
SALEM COMMUNICATIONS CORPORATION
AMENDMENT NO. 1 AND CONSENT ▇▇. ▇
▇▇▇▇▇▇▇▇▇ ▇▇. ▇ AND CONSENT NO. 1 (this "AMENDMENT"), dated as of August 5,
1998, to the Credit Agreement, dated as of September 25, 1997, by and among
SALEM COMMUNICATIONS CORPORATION, a California corporation (the "BORROWER"), THE
BANK OF NEW YORK, as administrative agent for the Lenders thereunder (in such
capacity, the "ADMINISTRATIVE AGENT"), BANK OF AMERICA NT&SA, as documentation
agent, and the Lenders party thereto (the "CREDIT AGREEMENT").
RECITALS
--------
I. Except as otherwise provided herein, capitalized terms used herein
which are not defined herein shall have the meanings set forth in the Credit
Agreement.
II. The Borrower has requested the consent of the Administrative Agent
for the acquisition (the "KIEV ACQUISITION") by the Borrower of certain assets
relating to radio station KIEV-AM, licensed to Glendale, California ("KIEV") for
approximately $33.4 million.
III. The Borrower has requested that, in connection with the KIEV
Acquisition (A) for purposes of calculating Operating Cash Flow (1) certain
expenses be treated as non-recurring expenses items, and (2) the Borrower be
permitted to recognize certain economies of scale on a pro-forma basis, and (B)
each of the leverage covenant and the pro-forma interest coverage covenant be
amended.
IV. The Borrower has requested the consent of the Administrative Agent to
the following: (1) the acquisition (the "KTEK ACQUISITION") by the Borrower of
certain assets relating to radio station KTEK-AM, licensed to Alvin, Texas for
approximately $2.2 million, (2) the acquisition (the "KYCR ACQUISITION") by the
Borrower of certain assets relating to radio station KYCR-AM, licensed to Golden
Valley, Minnesota for approximately $500 thousand, and (3) the acquisition
(together with the KIEV Acquisition, the KTEK Acquisition and the KYCR
Acquisition, the "FOUR ACQUISITIONS") by the Borrower of certain assets relating
to radio station KKMO-AM, licensed to Tacoma, Washington for approximately $500
thousand.
V. The Borrower has indicated that the borrowings under the Credit
Agreement necessary to consummate the Four Acquisitions and the KIEV
Acquisition, taken as a whole, will cause the Total Leverage Ratio to exceed
6.00:1.00 and, therefore, one or more of the Four Acquisitions would not meet
the requirement of Section 8.3(b)(iii)(x) of the Credit Agreement (the "SECTION
8.3(b)(iii)(x) REQUIREMENT"). The Borrower has asked for consent under the
Credit Agreement with respect to the foregoing.
VI. The Borrower plans to sell (a) KTSL-FM licensed to Spokane,
Washington for approximately $1.3 million in August of 1998, and (b) KAVC-FM
licensed to Lancaster, California for approximately $1.5 million in January of
1999. In addition, the Borrower sold WPZE-AM licensed to Boston, Massachusetts
for approximately $5.0 mil-
lion in November of 1997. All of the sales referred to in this Recital are
hereinafter referred to as the "REFERENCED DISPOSITIONS".
VII. The Borrower has requested that, regardless of the timing of each of
the Four Acquisitions and each of the Referenced Dispositions, for certain
purposes of the Loan Documents the Referenced Dispositions be treated as if they
preceded the Four Acquisitions.
VIII. The Borrower has proposed a corporate reorganization of Beltway Media
Partners ("BELTWAY"), licensee of ▇▇▇▇-▇▇, licensed to Washington, D.C.
("▇▇▇▇"), pursuant to which (1) the Borrower has formed Salem Media of Virginia,
Inc., a new wholly-owned subsidiary of the Borrower, and (2) the license for
▇▇▇▇ will be transferred to SMV, and (3) each of the partners of Beltway will
transfer their partnership interests in Beltway to SMV in exchange for shares of
capital stock of SMV (the "REORGANIZATION").
IX. In order to avoid certain adverse tax consequences in connection with
the Reorganization, the Borrower has requested that the Lenders release their
lien upon the partnership interests in, and the assets of, Beltway, and release
Beltway from its guaranty. After the consummation of the Reorganization, all of
the capital stock of, and all of the assets of, SMV will be pledged to the
Lenders, and SMV will issue a guaranty, all in accordance with Section 7.11 of
the Credit Agreement, and the Subsidiary Guaranty.
X. The Borrower has requested the ability to make additional investments
in money market mutual funds.
In consideration of the covenants, conditions and agreements hereinafter
set forth, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and pursuant to Section 11.1 of the
Credit Agreement, the Borrower and the Administrative Agent agree as follows:
1. Notwithstanding anything to the contrary contained in the first
paragraph of Section 8.3, the Administrative Agent consents to the KIEV
Acquisition, provided that (a) the consideration therefor given by the Borrower
and the Subsidiaries in the aggregate shall in no event exceed $33,400,000, and
(b) in all other respects, the KIEV Acquisition is consummated in accordance
with the terms of the Loan Documents.
2. The Administrative Agent agrees that (a) certain items identified by
the Borrower that relate to the KIEV Acquisition and are acceptable to the
Administrative Agent shall be treated as non-recurring expense items within the
meaning of, and for the sole purpose of, clause (iii) of the defined term
"Operating Cash Flow" contained in the Credit Agreement, and (b) the Operating
Cash Flow of KIEV for periods prior to the KIEV Acquisition shall be adjusted to
reflect operating efficiencies projected by the Borrower and acceptable to the
Administrative Agent. The Borrower represents and warrants to Administrative
Agent and the Lenders that such projections have been made in good faith.
3. The Administrative Agent consents to the omission of the Section
8.3(b)(iii)(x) Requirement in connection with the Four Acquisitions, provided
that each of
-2-
the Four Acquisitions is in all other respects consummated in accordance with
the Credit Agreement.
4. Section 1.1 of the Credit Agreement is amended by adding the
following defined terms:
"Amendment Effective Date": as defined in Amendment No. 1 and Consent
------------------------
No. 1, dated as of August 5, 1998, to this Agreement.
"Permitted Fund": (a) money market mutual funds whose investment
--------------
criteria limits them to (i) U.S. Government Treasury obligations, and (ii)
repurchase agreements collateralized by U.S. Government Treasury
obligations, provided that such agreements are entered into with government
securities dealers whose parents have a minimum credit rating of A1 or
better or P1 by Standard & Poor's Ratings Services, a Division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. ("S&P"), or ▇▇▇▇▇'▇ Investors Services, Inc.
("MOODY'S"), respectively, and (b) money market mutual funds rated AAAm by
Standard S&P.
5. Section 6.1 of the Credit Agreement is amended and restated in its
entirety as follows:
6.1 Total Leverage Ratio.
--------------------
Maintain at all times a Total Leverage Ratio not greater than the
applicable ratio set forth below opposite the applicable period set forth
below:
Periods Ratio
------------------ ---------
Effective Date through
June 29, 1998 7.00:1.00
June 30, 1998 to but excluding
the Amendment Effective Date 6.25:1.00
Amendment Effective Date
through March 30, 1999 6.75:1.00
March 31, 1999 through
December 30, 1999 6.00:1.00
December 31, 1999 through
December 30, 2000 5.25:1.00
December 31, 2000 through
December 30, 2001 4.50:1.00
December 31, 2001
and thereafter 4.00:1.00
-3-
6. Section 6.3 of the Credit Agreement is amended and restated in its
entirety as follows:
6.3 Consolidated Annual Operating Cash Flow to Pro-Forma Interest
-------------------------------------------------------------
Expense.
-------
Maintain as at the end of each fiscal quarter during the
applicable periods set forth below a ratio of Consolidated Annual Operating
Cash Flow to Pro-Forma Interest Expense not less than the ratio set forth
below opposite the applicable period set forth below:
Periods Ratio
------------------------ -------
Effective Date through
March 31, 1998 1.25:1.00
April 1, 1998 to but excluding
the Amendment Effective Date 1.50:1.00
Amendment Effective Date
through December 31, 1998 1.25:1.00
January 1, 1999 through
December 31, 1999 1.50:1.00
January 1, 2000 through
September 30, 2001 1.75:1.00
October 1, 2001 and
thereafter 2.00:1.00
7. For purposes of Section 2.4(b)(iv) only, the net cash proceeds of each
of the Referenced Dispositions shall, to the extent received within 360 days of
the Amendment Effective Date, be deemed to constitute Reinvested Proceeds to the
extent of (a) the cash consideration paid by the Borrower in connection with the
consummation of the KIEV Acquisition, less (b) the amount by which the
----
consideration paid in connection with the KIEV Acquisition would, but for this
Amendment, otherwise constitute Reinvested Proceeds.
8. Notwithstanding anything to the contrary contained in Sections 7.3,
8.3, 8.5, 8.7 or 8.8 of the Credit Agreement, the Administrative Agent consents
to the Reorganization.
9. The Administrative Agent releases any and all security interests in
the partnership interests in, and the assets of, Beltway, releases Beltway from
all of its obligations under the Subsidiary Guaranty and agrees to deliver to
the Borrower, at the sole cost and expense of the Borrower and promptly after
its reasonable request therefor, such Uniform Commercial Code termination
statements and other documents as the Borrower may reasonably request to
evidence the releases referred to herein, provided, however that
-4-
all of the foregoing releases shall be void unless the Reorganization is
consummated on or before November 1, 1998.
10. Section 8.5(b) of the Credit Agreement is amended and restated in its
entirety as follows:
(b) Investments in (1) short-term direct obligations of the
United States of America or agencies thereof which obligations are
guaranteed by the United States of America, and (2) Permissible Funds;
11. Sections 1 - 10 of this Amendment shall not become effective until
such date (the "AMENDMENT EFFECTIVE DATE") as Required Lenders and each of the
Subsidiary Guarantors shall have consented hereto by executing and delivering
the same.
12. In all other respects the Credit Agreement and the other Loan
Documents shall remain in full force and effect.
13. In order to induce the Administrative Agent to execute this Amendment
and the Lenders to consent hereto, the Borrower and the Subsidiary Guarantors
each (a) certifies that, immediately after giving effect to this Amendment, all
representations and warranties contained in the Loan Documents to which it is a
party shall be true and correct in all respects, (b) certifies that, immediately
after giving effect to this Amendment, no Default or Event of Default shall
exist under the Loan Documents, and (c) agrees to pay the reasonable fees and
disbursements of counsel to the Administrative Agent incurred in connection with
the preparation, negotiation and closing of this Amendment.
14. Each of the Borrower and the Subsidiary Guarantors (a) reaffirms and
admits the validity, enforceability and continuation of all Loan Documents to
which it is a party, and its obligations thereunder, and (b) agrees and admits
that as of the date hereof it has no valid defenses to or offsets against any of
its obligations to the Administrative Agent, the Documentation Agent, the Issuer
or any of the Lenders under the Loan Documents to which it is a party.
15. No Default or Event of Default waived under this Amendment shall
extend to any subsequent or other Default or Event of Default, or impair any
right consequent thereon.
16. This Amendment may be executed in any number of separate counterparts
and all of said counterparts taken together shall be deemed to constitute one
and the same document. It shall not be necessary in making proof of this
Amendment to produce or account for more than one counterpart signed by the
party to be charged.
17. This Amendment shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York, without regard to principles
of conflict of laws.
-5-
AMENDMENT NO. 1 AND CONSENT NO. 1
SALEM COMMUNICATIONS CORPORATION
The parties have caused this Amendment to be duly executed as of the date
first written above.
SALEM COMMUNICATIONS CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President
THE BANK OF NEW YORK,
as Administrative Agent
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Assistant Vice President
AMENDMENT NO. 1 AND CONSENT NO. 1
SALEM COMMUNICATIONS CORPORATION
BELTWAY MEDIA PARTNERS
By: Salem Communications
Corporation, a General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President
By: Golden Gate Broadcasting
Company, Inc., a General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President
By: New Inspiration Broadcasting
Company, Inc., a General
Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President
-2-
AMENDMENT NO. 1 AND CONSENT NO. 1
SALEM COMMUNICATIONS CORPORATION
ATEP RADIO, INC.
BISON MEDIA, INC.
▇▇▇▇▇ BROADCASTING, INC.
COMMON GROUND BROADCASTING, INC.
GOLDEN GATE BROADCASTING COMPANY, INC.
INLAND RADIO, INC.
INSPIRATION MEDIA OF TEXAS, INC.
INSPIRATION MEDIA, INC.
NEW ENGLAND CONTINENTAL MEDIA, INC.
NEW INSPIRATION BROADCASTING
COMPANY, INC.
OASIS RADIO, INC.
PENNSYLVANIA MEDIA ASSOCIATES, INC.
RADIO 1210, INC.
SALEM COMMUNICATIONS CORPORATION, A
DELAWARE CORPORATION
SALEM MEDIA CORPORATION
SALEM MEDIA OF CALIFORNIA, INC.
SALEM MEDIA OF COLORADO, INC.
SALEM MEDIA OF LOUISIANA, INC.
SALEM MEDIA OF OHIO, INC.
SALEM MEDIA OF OREGON, INC.
SALEM MEDIA OF PENNSYLVANIA, INC.
SALEM MEDIA OF TEXAS, INC.
SALEM MUSIC NETWORK, INC.
SALEM RADIO NETWORK INCORPORATED
SALEM RADIO REPRESENTATIVES, INC.
SOUTH TEXAS BROADCASTING, INC.
SRN NEWS NETWORK, INC.
VISTA BROADCASTING, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President
AMENDMENT ▇▇. ▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇. ▇
▇▇▇▇▇ COMMUNICATIONS CORPORATION
THE BANK OF NEW YORK, as a Lender
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Assistant Vice President
AMENDMENT NO. 1 AND CONSENT NO. 1
SALEM COMMUNICATIONS CORPORATION
BANK OF AMERICA NT & SA
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
AMENDMENT NO. 1 AND CONSENT NO. 1
SALEM COMMUNICATIONS CORPORATION
BANKBOSTON, N.A.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Director
AMENDMENT NO. 1 AND CONSENT NO. 1
SALEM COMMUNICATIONS CORPORATION
FLEET BANK, N.A.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Assistant Vice President
AMENDMENT NO. 1 AND CONSENT NO. 1
SALEM COMMUNICATIONS CORPORATION
UNION BANK OF CALIFORNIA, N.A.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Assistant Vice President