Edgar Filing: SALEM COMMUNICATIONS CORP /DE/

Definitive Notice and Proxy Statement

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant x

Filed by a Party other than the Registrant ¨

Check the appropriate box:


¨ Preliminary Proxy Statement		¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x Definitive Proxy Statement

¨ Definitive Additional Materials

¨ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

SALEM COMMUNICATIONS CORPORATION

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

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(2)

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Total fee paid:

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

(1)

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Date Filed:

LOGO

4880 Santa Rosa Road

Camarillo, CA 93012

(805) 987-0400

April 27, 2007

Dear Stockholder:

You are cordially invited to attend the 2007 Annual Meeting of Stockholders (the “Annual Meeting”) of Salem Communications Corporation (“Salem”). The Annual Meeting is scheduled to be held on Wednesday, June 6, 2007, at the Westlake Village Inn, 31943 Agoura Road, Westlake Village, California, at 9:30 a.m. local time. As described in the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement, the agenda for the Annual Meeting includes:

The election of eight persons to the board of directors to serve until the next annual meeting of stockholders or until their respective successors are duly elected and qualified; and

The transaction of such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof.

The board of directors recommends that you vote FOR the election of the slate of director nominees. Please refer to the Proxy Statement for detailed information on the proposal. Directors and executive officers of Salem will be present at the Annual Meeting to respond to questions that our stockholders may have regarding the business to be transacted.

We urge you to vote your proxy as soon as possible. Your vote is very important, regardless of the number of shares you own. Whether or not you plan to attend the Annual Meeting in person, we urge you to sign, date and return the enclosed proxy card promptly in the accompanying postage prepaid envelope. You may, of course, attend the Annual Meeting and vote in person even if you have previously returned your proxy card. The approximate date on which this Proxy Statement and the enclosed proxy card are first being sent to stockholders is April 27, 2007.

On behalf of the board of directors and all of the employees of Salem, we wish to thank you for your support.

Sincerely yours,

LOGO

STUART W. EPPERSON

Chairman of the Board

LOGO

EDWARD G. ATSINGER III

President and Chief Executive Officer

If you have any questions concerning the Proxy Statement or the accompanying proxy card, or if you need any help in voting your shares, please telephone Jonathan L. Block of Salem at (805) 987-0400.

PLEASE SIGN, DATE AND RETURN

THE ENCLOSED PROXY CARD TODAY.

LOGO

4880 Santa Rosa Road

Camarillo, CA 93012

(805) 987-0400

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held on June 6, 2007

NOTICE IS HEREBY GIVEN that the 2007 Annual Meeting of Stockholders (the “Annual Meeting”) of Salem Communications Corporation (“Salem”) will be held on Wednesday, June 6, 2007, at the Westlake Village Inn, 31943 Agoura Road, Westlake Village, California, at 9:30 a.m. local time, subject to adjournment or postponement by the board of directors, for the following purposes:

To elect eight persons to the board of directors to serve until the next annual meeting of stockholders or until their respective successors are duly elected and qualified; and

To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof.

Only holders of record of Salem’s Class A common stock, par value $0.01 per share, and Class B common stock, par value $0.01 per share, on April 13, 2007, the record date, are entitled to notice of, and to vote at, the Annual Meeting and any adjournments or postponements thereof. A list of such stockholders will be available for examination by any stockholder at the time and place of the Annual Meeting.

Holders of a majority of the voting power of the outstanding shares of the Class A common stock and of the Class B common stock must be present in person or by proxy in order for the Annual Meeting to be held. Therefore, we urge you to date, sign and return the accompanying proxy card in the enclosed postage prepaid envelope whether or not you expect to attend the Annual Meeting in person. If you attend the Annual Meeting and wish to vote your shares personally, you may do so by validly revoking your proxy as described below.

Prior to the voting thereof, a proxy may be revoked by the person executing such proxy by: (i) filing with the Secretary of Salem, prior to the commencement of the Annual Meeting, either a duly executed written notice dated subsequent to such proxy revoking the same or a duly executed proxy bearing a later date, or (ii) attending the Annual Meeting and voting in person.

If you plan to attend the Annual Meeting, we would appreciate your response by indicating so at the appropriate box on the enclosed proxy card.

By order of the board of directors,

LOGO

JONATHAN L. BLOCK

Secretary

Camarillo, California

April 27, 2007

YOUR VOTE IS IMPORTANT.

TO VOTE YOUR SHARES, PLEASE SIGN AND DATE THE ENCLOSED PROXY

CARD AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.

SALEM COMMUNICATIONS CORPORATION

4880 Santa Rosa Road

Camarillo, CA 93012

(805) 987-0400

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS

To Be Held on June 6, 2007

TABLE OF CONTENTS


		Page No.
INTRODUCTION		1
INFORMATION REGARDING VOTING AT THE ANNUAL MEETING		1
General		1
Record Date, Quorum and Voting		1
Solicitation		2
Householding		2
THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS		3
Board of Directors		3
Director Independence and Executive Sessions		5
Committees of the Board of Directors		5
Audit Committee		6
Compensation Committee		6
Nominating and Corporate Governance Committee		6
Director Attendance at Board Meetings and 2006 Annual Meeting of Stockholders		8
Communications Between Stockholders and the Board		8
Financial Code of Conduct		8
Executive Officers		8
COMPENSATION DISCUSSION & ANALYSIS		10
General Discussion		10
Named Executive Officer Compensation		11
Incentive (Bonus) Awards Earned in 2006		12
Long-Term Incentive Compensation		12
Perquisites and Benefits		13
Severance and Change-in-Control Benefits		15
Tax Deductibility of Executive Compensation		15
Security Ownership Requirements/Guidelines		15
COMPENSATION COMMITTEE REPORT		16
EXECUTIVE COMPENSATION		17
Summary Compensation Table		17
Grants of Plan-Based Awards in 2006		19
Outstanding Equity Awards at Fiscal Year-End		20
Option Exercises and Stock Vested		23
Non-Qualified Deferred Compensation Plan		23
Potential Payments to the Company’s Named Executive Officers upon Termination or Change in Control		24
EQUITY COMPENSATION PLAN INFORMATION		27
Securities Authorized for Issuance Under Equity Compensation Plans		27
DIRECTOR COMPENSATION		28
AUDIT COMMITTEE REPORT		30
STOCK PRICE PERFORMANCE GRAPH		32
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT		33
RELATED PARTY TRANSACTIONS		35
Leases with Principal Stockholders		35
Radio Stations Sold to Chesapeake-Portsmouth Broadcasting Corporation		36
Radio Stations Owned by the Eppersons		36
Radio Stations Owned by Mr. Hinz		36
Truth for Life—Mr. Hinz and Mr. Weinberg		37
Split-Dollar Life Insurance		37
Transportation Services Supplied by Atsinger Aviation		37


		Page No.
Procedures for Review, Approval or Ratification of Related Party Transactions		37
THE COMPANY’S RELATIONSHIP WITH ITS INDEPENDENT REGISTERED PUBLIC ACCOUNTS		38
Principal Accountant Fees And Services		38
Audit Committee’s Pre-Approval Policies And Procedures		38
PROPOSAL 1 ELECTION OF DIRECTORS		38
Vote Required and Board of Directors’ Recommendation		39
STOCKHOLDERS’ PROPOSALS FOR 2008 PROXY STATEMENT		39
OTHER MATTERS		40
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE		40
ANNUAL REPORT ON FORM 10-K		41

INTRODUCTION

This Proxy Statement is furnished in connection with the solicitation by the board of directors (the “board” or the “board of directors”) of Salem Communications Corporation, a Delaware corporation (the “Company”), of proxies for use at the 2007 Annual Meeting of Stockholders of the Company (the “Annual Meeting”) scheduled to be held at the time and place and for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.

INFORMATION REGARDING VOTING AT THE ANNUAL MEETING

General

At the Annual Meeting, the stockholders of the Company are being asked to consider and to vote upon the following proposal:


Proposal 1		The election of the eight directors nominated by the Company’s board of directors to serve until the annual meeting of stockholders to be held in the year 2008 or until their respective successors are duly elected and qualified.

For information regarding this proposal, see the section of this Proxy Statement entitled “PROPOSAL 1—ELECTION OF DIRECTORS.”

Shares represented by properly executed proxies received by the Company will be voted at the Annual Meeting in the manner specified therein or, if no instructions are marked on the enclosed proxy card, FOR each of the director nominees identified on such proxy card for such directors, as the holder of such shares is entitled to vote. Although management does not know of any matter other than the one proposal described above to be acted upon at the Annual Meeting, unless contrary instructions are given, shares represented by valid proxies will be voted by the persons named on the accompanying proxy card in accordance with their respective best judgment in respect of any other matters that may properly be presented for a vote at the Annual Meeting.

Execution of a proxy will not in any way affect a stockholder’s right to attend the Annual Meeting and vote in person, and any person giving a proxy has the right to revoke it at any time before it is exercised by: (a) filing with the Secretary of Salem, prior to the commencement of the Annual Meeting, either a duly executed written notice dated subsequent to such proxy revoking the same or a duly executed proxy bearing a later date, or (b) attending the Annual Meeting and voting in person.

The mailing address of the principal executive offices of the Company is 4880 Santa Rosa Road, Camarillo, California 93012, and its telephone number is (805) 987-0400.

Record Date, Quorum and Voting

Only stockholders of record on April 13, 2007 (the “Record Date”), will be entitled to notice of and to vote at the Annual Meeting. There were outstanding on the Record Date 18,296,324 shares of Class A common stock, par value $0.01 per share (“Class A common stock”), and 5,553,696 shares of Class B common stock, par value $0.01 per share (“Class B common stock”) (the Class A common stock and the Class B common stock are collectively referred to as the “common stock”). Each share of outstanding Class A common stock is entitled to one vote on each matter to be voted on at the Annual Meeting and each share of outstanding Class B common stock is entitled to ten votes on each matter to be voted on at the Annual Meeting, except that, as provided in the Company’s Amended and Restated Certificate of Incorporation, the holders of Class A common stock shall be entitled to vote as a class, exclusive of the holders of the Class B common stock, to elect two “Independent Directors.” The two Independent Directors shall be elected by a majority of the votes of the shares of Class A common stock present in person or represented by proxy and entitled to vote on the election of the Independent Directors; the remaining six directors will be elected by a majority of the votes of the shares of Class A common

stock and Class B common stock present in person or represented by proxy and entitled to vote on the election of such directors. For information regarding the election of the Independent Directors, see the section of this Proxy Statement entitled “PROPOSAL 1—ELECTION OF DIRECTORS.”

The presence, in person or by proxy, of the holders of at least a majority of the voting power of the common stock issued and outstanding and entitled to vote is necessary to constitute a quorum at the Annual Meeting. In the event there are not sufficient votes for a quorum at the time of the Annual Meeting, the Annual Meeting may be adjourned in order to permit the further solicitation of proxies.

Under Delaware law and the Company’s Amended and Restated Certificate of Incorporation and Bylaws, abstentions and broker non-votes are counted for the purpose of determining the presence or absence of a quorum for the transaction of business. With regard to the election of directors, votes may be cast in favor or withheld; votes that are withheld will be excluded entirely from the vote and will have no effect. Any stockholder proposals that properly come before the Annual Meeting require, in general, the affirmative vote of a majority of the voting power of the shares of Class A common stock and Class B common stock present, in person or represented by proxy, at the Annual Meeting and entitled to vote on the subject matter.

Solicitation

The cost of preparing, assembling and sending the Notice of Annual Meeting of Stockholders, this Proxy Statement and the enclosed proxy card will be paid by the Company. Following the delivery of this Proxy Statement, directors, officers and other employees of the Company may solicit proxies by mail, telephone, facsimile or other electronic means or by personal interview. Such persons will receive no additional compensation for such services. Brokerage houses and other nominees, fiduciaries and custodians nominally holding shares of Class A common stock of record will be requested to forward proxy soliciting material to the beneficial owners of such shares, and will be reimbursed by the Company for their reasonable charges and expenses in connection therewith.

Householding

With regard to the delivery of Annual Reports and Proxy Statements, under certain circumstances the Securities and Exchange Commission (“SEC”) permits a single set of such documents to be sent to any household at which two or more stockholders reside if they appear to be members of the same family. Each stockholder, however, still receives a separate proxy card. This procedure, known as “householding,” reduces the amount of duplicate information received at a household and reduces delivery and printing costs as well. A number of banks, brokers and other firms have instituted householding and have previously sent a notice to that effect to certain of the Company’s stockholders whose shares are registered in the name of such bank, broker or other firm. As a result, unless the stockholders receiving such notice gave contrary instructions, only one Annual Report and/or Proxy Statement, as applicable, will be delivered to an address at which two or more stockholders reside. If any stockholder residing at such an address wishes to receive a separate Annual Report or Proxy Statement in the future, such stockholder should telephone toll-free 1-800-542-1061. In addition, if any stockholder who previously consented to householding desires to receive a separate copy of a Proxy Statement or Annual Report, as applicable, for each stockholder at his or her same address, such stockholder should contact his or her bank, broker or other firm in whose name the shares are registered or contact the Company at the address or telephone number listed on page 1 of this Proxy Statement. Similarly, a stockholder may use any of these methods if such stockholder is receiving multiple copies of a Proxy Statement or Annual Report and would prefer to receive a single copy in the future.

THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS

Board of Directors

The board of directors presently consists of eight members. The following table sets forth certain information as of April 20, 2007 except where otherwise indicated, with respect to the directors of the Company. Each of the directors of the Company serves a one-year term and all directors are subject to re-election at each annual meeting of stockholders.


Name of Director	Age	First became Director of the Company	Position(s) held with the Company
Stuart W. Epperson	70	1986	Chairman of the Board
Edward G. Atsinger III	67	1986	President, Chief Executive Officer and Director
David Davenport	56	2001	Director
Eric H. Halvorson	58	1988	Director
Roland S. Hinz	68	1997	Director
Richard A. Riddle	62	1997	Director
Paul Pressler	76	2002	Director
Dennis M. Weinberg	54	2005	Director

Set forth below is certain information concerning the principal occupation and business experience of each of the directors during the past five years and other relevant experience.

Stuart W. Epperson

Mr. Epperson has been Chairman of the Board of the Company since its inception. He is also a director of Salem Communications Holding Corporation, a wholly-owned subsidiary of the Company. Mr. Epperson has been engaged in the ownership and operation of radio stations since 1961. Mr. Epperson has been a member of the board of directors of the National Religious Broadcasters for a number of years; he was re-elected to a three-year term on that board in February 2007. Mr. Epperson is married to Nancy A. Epperson who is Mr. Atsinger’s sister.

Edward G. Atsinger III

Mr. Atsinger has been President, Chief Executive Officer, a director of the Company and a director of each of the Company’s subsidiaries since their inception. He has been engaged in the ownership and operation of radio stations since 1969. Mr. Atsinger has been a member of the board of directors of the National Religious Broadcasters for a number of years; he was re-elected to a three-year term on that board in February 2007. Mr. Atsinger has also been a member of the board of directors of Oaks Christian School since 1999. Mr. Atsinger is also a member of Cornerstone Christian Network, which is involved in evangelism and church relations and development. Mr. Atsinger is the brother-in-law of Mr. Epperson.

David Davenport

Mr. Davenport has been a director of the Company since November 2001. Mr. Davenport is a Distinguished Professor of Public Policy at Pepperdine University and has served in that position since August 2003. He is also a research fellow at the Hoover Institution and has served in that position 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 May 2001. Mr. Davenport served as President of Pepperdine University from 1985 to 2000 and from 1980 through 1985 he served as a Professor of Law, General Counsel, and Executive Vice President of the University. Mr. Davenport currently serves on the governing or advisory boards of Hope Network Ministries, Forest Lawn Memorial Parks Association and Common Sense California. Mr. Davenport also serves on the board of directors of Ameron International Corporation.

Eric H. Halvorson

Mr. Halvorson has been a director of the Company since 1988. Mr. Halvorson is currently Executive in Residence at Pepperdine University, where he holds a joint teaching appointment to the undergraduate Business Division and the Pepperdine Law School. Mr. Halvorson was President and Chief Executive Officer of The Thomas Kinkade Company from 2003 to 2005. Mr. Halvorson was also a Visiting Professor at Pepperdine University from 2000 to 2003. Mr. Halvorson was Chief Operating Officer of the Company from 1995 to 2000 and Executive Vice President of the Company from 1991 to 2000. From 1991 to 2000, Mr. Halvorson also served as General Counsel to the Company. 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 Vice President and General Counsel of the Company. 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. Mr. Halvorson is a member of the board of directors of Intuitive Surgical, Inc.

Roland S. Hinz

Mr. Hinz has been a director of the Company since September 1997. 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 1982. Mr. Hinz is also the managing member of Hi-Favor Broadcasting, LLC, the licensee of radio stations KLTX-AM, Long Beach, California, and KEZY-AM, San Bernardino, California (which were acquired from the Company in August 2000 and December 2001, respectively), and radio station KSDO-AM, San Diego, California. Mr. Hinz also serves on the board of directors of the Association for Community Education, Inc. a not-for-profit corporation operating Spanish Christian radio stations in California. Mr. Hinz also serves on the board of directors of Truth for Life, a non-profit organization that is a customer of the Company.

Paul Pressler

Judge Pressler has been a director of the Company since March 2002, and is also a board member of the Free Market Foundation and KHCB Network, a non-profit corporation which owns Christian radio stations in Texas and Louisiana, and a board member of National Religious Broadcasters. He has been an active leader in the Southern Baptist Convention and has served as its First Vice President. Additionally, he is a member of the Texas Philosophical Society and on the boards of various non-profit organizations. Since 1995, Judge Pressler has been a partner in the law firm of Woodfill & Pressler and its predecessors. A retired justice of the Texas Court of Appeals, Judge Pressler was appointed Justice of the Texas Court of Appeals in 1978, serving until 1992. Judge Pressler also served as District Judge from 1970 to 1978. From 1958 to 1970, he was associated with the law firm of Vinson & Elkins. From 1957 to 1959, he was a member of the Texas Legislature, House of Representatives.

Richard A. Riddle

Mr. Riddle has been a director of the Company since September 1997. Mr. Riddle is an independent businessman specializing in providing financial assistance and consulting to individuals and manufacturing companies. He was President and majority stockholder of I. L. Walker Company from 1988 to 1997 when that company was sold. He also was Chief Operating Officer and a major stockholder of Richter Manufacturing Corp. from 1970 to 1987.

Dennis M. Weinberg

Mr. Weinberg has been director of the Company since November 1, 2005. Mr. Weinberg was one of the founding directors for WellPoint, a health benefits company. From February of 2002 to May 2006, Mr. Weinberg served as President and Chief Executive Officer for ARCUS Enterprises, a WellPoint business development subsidiary. Previously, Mr. Weinberg served for nearly 20 years in a variety of CEO, Group President, and

Executive Vice President positions with WellPoint and its various affiliates. Prior to WellPoint, Mr. Weinberg held a variety of business consulting positions with the accounting firm of Touche-Ross and Company (currently Deloitte & Touche) in Chicago. Before that, he was general manager for the CTX Products Division of Pet, Inc. at the time, an I.C. Industries Company in St. Louis, Missouri, a designer and manufacturer of commercial computerized processing equipment. Mr. Weinberg is a General Member of the development companies of FRWII, LLC, SkyView Development, LLC and Allyson Aviation, LLC. He is the co-founder of Cornerstone Network Associates, Life Skills for American Families, and is an advisor for the Pacific Justice Institute. Mr. Weinberg also serves on the board of directors of Truth for Life, a non-profit organization that is a customer of the Company.

Director Independence and Executive Sessions

In November 2006, the Company’s board of directors evaluated the independence of each of the Company’s directors pursuant to standards set forth in the listing regulations of the National Association of Securities Dealers, Inc., as approved by the SEC (“NASDAQ Rules”). During this review, the board of directors considered various transactions and relationships among directors (and their affiliates or family members), members of the Company’s senior management, affiliates and subsidiaries of the Company and certain other parties that occurred during the past three fiscal years. This review was conducted to determine whether, under the NASDAQ Rules, any such relationships or transactions would affect the board of directors’ determination as to each director’s independence from management.

Upon conclusion of this review, the board of directors determined that, of the directors nominated for election at the Annual Meeting, a majority of the board (comprised of Messrs. Davenport, Halvorson, Hinz, Pressler, Riddle and Weinberg) is independent of the Company and its senior management as required by the NASDAQ Rules.

The NASDAQ Rules also require that independent members of the board of directors meet periodically in executive sessions during which only independent directors are present. The Company’s independent directors have met separately in such executive sessions and in the future will regularly meet in executive sessions as required by the NASDAQ Rules.

Committees of the Board of Directors

The Company’s board of directors has three committees: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. The following table identifies the independent members of the board of directors and lists the members and chairman of each of these committees:


Name	Independent	Audit Committee	Compensation Committee	Nominating and Corporate Governance Committee
Stuart W. Epperson
Edward G. Atsinger III
David Davenport	I		X	X
Eric H. Halvorson	I	C		X
Roland S. Hinz	I		C	X
Judge Paul Pressler	I			C
Richard A. Riddle	I	X	X	X
Dennis M. Weinberg	I	X		X

I = Director is independent

X = Current member of committee

C = Current member and chairman of the committee

Audit Committee

The Audit Committee currently consists of Messrs. Halvorson (Chairman), Riddle and Weinberg, each of whom is independent under the NASDAQ Rules and applicable SEC rules and regulations. The board of directors has determined that Mr. Halvorson, the Audit Committee Chairperson, qualifies as an “audit committee financial expert,” as defined and required by applicable SEC rules and regulations.

The Audit Committee met four times in 2006 and operates under a written charter adopted by the board of directors. This charter is available on the Company’s Internet website (www.salem.cc) and a copy of the charter may be obtained upon written request from the Secretary of the Company. Any information found on the Company’s website is not a part of, or incorporated by reference into, this or any other report of the Company filed with, or furnished to, the SEC.

The Audit Committee’s responsibilities are generally to assist the board of directors in fulfilling its legal and fiduciary responsibilities relating to accounting, audit and reporting policies and practices of the Company and its subsidiaries. The Audit Committee also, among other things, oversees the Company’s financial reporting process, retains and engages the Company’s independent registered public accounting firm, approves the fees for the Company’s independent registered public accounting firm, monitors and reviews the quality, activities and functions of the Company’s independent registered public accounting firm, and monitors the adequacy of the Company’s operating and internal controls and procedures as reported by management and the Company’s independent registered public accounting firm. The Audit Committee Report set forth later in this Proxy Statement provides additional details about the duties and activities of this committee.

Compensation Committee

As provided under applicable laws and rules, the Company’s board of directors delegates authority for compensation matters to the Compensation Committee of the board of directors. The Compensation Committee’s membership is determined by the board of directors. The Compensation Committee currently consists of Messrs. Hinz (Chairman), Davenport and Riddle, each of whom is independent under the NASDAQ Rules. The Compensation Committee is authorized to review and approve compensation, including non-cash benefits, and severance arrangements for the Company’s Section 16 officers and employees and to approve salaries, remuneration and other forms of additional compensation and benefits as it deems necessary. The Compensation Committee also administers the Company’s Amended and Restated 1999 Stock Incentive Plan (the “Stock Plan”). The Compensation Discussion & Analysis set forth later in this Proxy Statement provides additional details concerning compensation for the Company’s senior management.

The Compensation Committee held four meetings in 2006. The Compensation Committee meets at least twice annually and at additional times as are necessary or advisable to fulfill all of its duties and responsibilities.

The Compensation Committee operates pursuant to a charter that was approved by the board of directors. The charter sets forth the responsibilities of the Compensation Committee. The Compensation Committee and the Company’s board of directors annually (or more often as needed) review the charter to ensure it conforms to current laws and practices. This charter is available on the Company’s Internet website (www.salem.cc) and a copy of the charter may be obtained from the Secretary of the Company upon written request. Any information found on the Company’s website is not part of, or incorporated by reference into, this or any other report of the Company filed with, or furnished to, the SEC.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee currently consists of Messrs. Pressler (Chairman), Davenport, Halvorson, Hinz, Riddle and Weinberg, each of whom is independent under the NASDAQ Rules. The committee met two times in 2006.

The board of directors has adopted a written charter for the Nominating and Corporate Governance Committee. This charter is available on the Company’s Internet website (www.salem.cc) and a copy of the charter may be obtained upon written request from the Secretary of the Company. Any information found on the Company’s website is not a part of, or incorporated by reference into, this or any other report of the Company filed with, or furnished to, the SEC.

The Nominating and Corporate Governance Committee is authorized to: (a) develop and recommend a set of corporate governance standards to the board of directors for adoption and implementation, (b) identify individuals qualified to become members of the board of directors, (c) recommend that director nominees be elected at the Company’s next annual meeting of stockholders, (d) recommend nominees to serve on each standing committee of the board of directors, (e) lead in the annual review of board performance and evaluation of the board’s effectiveness, (f) ensure that succession planning takes place for the position of chief executive officer and other key Company senior management positions, and (g) analyze, review and, where appropriate, approve all related party transactions to which the Company or its subsidiaries or affiliates are a party, all in accordance with applicable rules and regulations.

To qualify as a nominee for service on the board of directors, a candidate must have sufficient time and resources available to successfully carry out the duties required of a Company board member. The committee desires to attract and retain highly qualified directors who will diligently execute their responsibilities and enhance their knowledge of the Company’s core businesses.

The Nominating and Corporate Governance Committee implements the Company’s policy regarding stockholder nominations by considering nominees for director positions that are made by the Company’s stockholders. Any stockholder desiring to make such a nomination must submit in writing the name(s) of the recommended nominee(s) to the Secretary of the Company at least 90 days before the annual meeting of stockholders. The written submission must also contain biographical information about the proposed nominee, a description of the nominee’s qualifications to serve as a member of the board of directors, and evidence of the nominee’s valid consent to serve as a director of the Company if nominated and duly elected.

The Company’s directors provide oversight of the Company’s management and play a key role in shaping the strategic direction of the Company. Consistent with the Company’s Nominating and Corporate Governance Charter, the Nominating and Corporate Governance Committee considers various criteria in board candidates, including, among others, independence, character, judgment and business experience, as well as their appreciation of the Company’s core purpose, core values, and whether they have time available to devote to board activities. The Nominating and Corporate Governance Committee also considers whether a potential nominee would satisfy:

The criteria for director “independence” established by the NASD (“NASDAQ”); and

The SEC’s definition of “audit committee financial expert”.

Whenever a vacancy exists on the board due to expansion of the board’s size or the resignation or retirement of an existing director, the Nominating and Corporate Governance Committee identifies and evaluates potential director nominees. The Nominating and Corporate Governance Committee considers recommendations of management, stockholders and others. The Nominating and Corporate Governance Committee has sole authority to retain and terminate any search firm to be used to identify director candidates, including approving its fees and other retention terms.

Director candidates are evaluated using the criteria described above and in light of the then-existing composition of the board, including its overall size, structure, backgrounds and areas of expertise of existing directors and the relative mix of independent and employee directors. The Nominating and Corporate Governance Committee also considers the specific needs of the various board committees. The Nominating and Corporate Governance Committee recommends potential director nominees to the full board, and final approval of a candidate for nomination is determined by the full board. This evaluation process is the same for director nominees who are recommended by our stockholders.

The Nominating and Corporate Governance Committee did not receive any recommendations from stockholders proposing candidate(s) for election at the 2007 Annual Meeting. None of the directors serving on the Audit Committee, the Compensation Committee, or the Nominating and Corporate Governance Committee are employees of the Company.

Director Attendance at Board Meetings and 2006 Annual Meeting of Stockholders

The full board of directors held four regularly-scheduled meetings and one special meeting in 2006. During 2006, each of the Company’s incumbent directors attended all of the four regularly-scheduled meetings of the full board of directors and all meetings of the committees of the board of directors on which they served. Mr. Davenport was the only board member who did not participate in the special meeting of the board of directors that occurred in 2006. The Company encourages, but does not require, that each director attend the Company’s Annual Meeting. In 2006, each of the Company’s incumbent directors as of May 24, 2006 attended the 2006 annual meeting of stockholders.

Communications Between Stockholders and the Board

The Company has historically handled communications between stockholders and the board of directors on an ad hoc basis. No formal policy or process for such communications has been adopted by the Company as of the date of this Proxy Statement. The Company has, however, taken actions to ensure that the views of its stockholders are communicated to the board or one or more of its individual directors, as applicable. The board considers its responsiveness to such communications as timely and exemplary.

Financial Code of Conduct

The Company has adopted a Financial Code of Conduct that applies to each director of the Company, the Company’s CEO, principal financial officer, principal accounting officer or controller and persons performing similar functions. This Financial Code of Conduct has been adopted by the board as a “code of ethics” that satisfies applicable NASDAQ Rules. The Financial Code of Conduct is available on the Company’s Internet website (www.salem.cc) and a copy of the code may be obtained free of charge upon written request from the Secretary of the Company. Any information found on the Company’s website is not a part of, or incorporated by reference into, this or any other report of the Company filed with, or furnished to, the SEC.

Executive Officers

Set forth below are the executive officers of the Company, together with the positions held by those persons as of April 20, 2007. The executive officers are elected annually and serve at the pleasure of the Company’s board of directors; however, the Company has entered into Employment Agreements with Messrs. Epperson, Atsinger, Davis and Evans, which agreements are described under the section of this Proxy Statement entitled “EXECUTIVE COMPENSATION” below.


Name of Executive Officer	Age	Position(s) Held with the Company
Stuart W. Epperson	70	Chairman of the Board
Edward G. Atsinger III	67	President, Chief Executive Officer and Director
Joe D. Davis	63	Executive Vice President and Chief Operating Officer
David A.R. Evans	44	Executive Vice President—Business Development and Chief Financial Officer
Jonathan L. Block	40	Vice President, General Counsel and Secretary
Evan D. Masyr	35	Vice President—Accounting and Finance

Set forth below is certain information concerning the business experience during the past five years and other relevant experience of each of the individuals named above (excluding Messrs. Atsinger and Epperson,

whose business experience is described in the section of this Proxy Statement entitled “THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS—Board of Directors” above).

Joe D. Davis

Mr. Davis has been the Company’s Executive Vice President and Chief Operating Officer since March 2005. Prior to that time, he was Executive Vice President of Radio from 2003 until March 2005, Executive Vice President, Operations from 2001 to 2003, Senior Vice President of the Company from 2000 to 2001, Vice President, Operations of the Company from 1996 to 2000 and General Manager of WMCA-AM from 1989 to 1996. He served concurrently as General Manager of WWDJ-AM from 1994 to 1996. Previously he was President of Davis Eaton Corporation in Phoenix, Arizona and also served as Vice President and Executive Director of one of the Company’s national ministry clients. He has been involved professionally in various aspects of broadcasting since 1967.

David A. R. Evans

Mr. Evans has been Executive Vice President—Business Development and Chief Financial Officer of the Company since September 2005. Mr. Evans was Executive Vice President and Chief Financial Officer from September 2003 to September 2005. From 2000 to 2003, Mr. Evans served as the Company’s Senior Vice President and Chief Financial Officer. From 1997 to 2000, Mr. Evans served as Senior Vice President and Managing Director-Europe, Middle East, and Africa of Warner Brothers Consumer Products in London, England. He also served at Warner Brothers 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, and Business Development from 1992 to 1996. From 1990 to 1992, he served as Regional Financial Controller-Europe for Warner Brothers based in London, England. Prior to 1990, Mr. Evans was an audit manager with Ernst & Young LLP in Los Angeles, California and worked as a U.K. Chartered Accountant for Ernst & Young in London, England.

Jonathan L. Block

Mr. Block has been General Counsel of the Company since May 2000, Vice President since 1999 and Corporate Secretary since 1997. Since August 2000, Mr. Block has been a director of each subsidiary of the Company other than Salem Communications Holding Corporation. From 1995 to 2000, Mr. Block served as Associate General Counsel of the Company. Since May 2005, Mr. Block has been a director of Alaska National Corporation and its subsidiary Alaska National Insurance Company, a property and casualty insurance company.

Evan D. Masyr

Mr. Masyr has been Vice President—Accounting and Finance since September 2005. From March 2004 to September 2005, Mr. Masyr was Vice President of Accounting and Corporate Controller. Prior to that time, Mr. Masyr was Vice President and Corporate Controller from January 2003 to March 2004. From February 2000 to December 2002, he served as Controller. From 1993 to February 2000, Mr. Masyr worked for PricewaterhouseCoopers LLP (formerly, Coopers & Lybrand LLP). Mr. Masyr has been a Certified Public Accountant since 1995.

COMPENSATION DISCUSSION & ANALYSIS

General Discussion

The Company’s Executive Compensation Philosophy

The board of directors of the Company believes that a key to the Company’s current and future success is its ability to attract and retain qualified individuals who are committed to the Company’s success and capable of delivering on such commitment. The Company’s compensation and benefits programs are designed to enable the attraction, retention and motivation of the best possible employees to operate and manage the Company at all levels. At the same time, the board of directors of the Company is committed to a compensation policy for the Company’s executive management that is appropriately transparent to the Company’s stockholders and in alignment with stockholders’ best interests.

The Company’s executive compensation programs are based upon a pay-for-performance philosophy that provides incentives to achieve both short-term and long-term objectives and to reward individual and Company performance. In addition to evaluating performance using financial and operational metrics, the CEO, CFO and the Company’s three other most highly compensated executive officers during 2006 (collectively, the “Named Executive Officers”) are evaluated in many areas that are not measured directly by financial or operational results. These areas include: how well each Named Executive Officer helps the Company to achieve its strategic goals; each executive’s ability to develop his or her subordinates; and, each executive’s efforts to enhance the Company’s relationship with key stakeholders.

Role of Committee

The role of the Company’s Compensation Committee (the “Committee”) is to oversee the Company’s compensation and benefit plans and policies, administer its Stock Plan (including reviewing and approving equity grants to elected officers), and review and approve all compensation decisions relating to elected officers, including those for the Company’s Named Executive Officers. In 2006, the actions of the Committee included: enhancing the transparency of compensation policies and actions; improving the alignment of Named Executive Officer compensation structures with the Company’s strategic objectives; reviewing objective benchmarks and metrics by which a Named Executive Officer’s performance can be measured; and, analyzing peer compensation and performance data for comparison with the Company’s Named Executive Officers.

Management’s Role in Determining Compensation

The Company’s Named Executive Officers do not determine or approve any element or component of their own compensation. The Company’s CEO provides a recommendation to the Committee for base salary and annual incentive compensation for the Named Executive Officers reporting to him.

Compensation Committee Interlocks and Insider Participation

No member of the Committee is, or formerly was, an officer or employee of the Company or any of its subsidiaries and none had any relationship with the Company requiring disclosure herein under applicable rules. In addition, to the Company’s knowledge, no executive officer or director of the Company has served as a director or a member of the compensation committee of another entity that requires disclosure herein under applicable rules.

Benchmarking

It is the intent of the board of directors that the Company be in a position to compete for highly qualified employees, including its Named Executive Officers. Accordingly, the process for compensation determination involves the Committee’s consideration of peer compensation levels. While the Committee does not have a formal policy regarding benchmarking, when determining recommended salary, target bonus levels and target

annual long-term incentive award values for Named Executive Officers, the Committee gives consideration to compensation practices at peer radio broadcast companies, based on available data. The companies that comprised the Company’s radio broadcast peer group in 2006 consisted of: Beasley Broadcast Group, Inc., Cumulus Media Inc., Cox Radio Inc., Emmis Communications Corp., Entercom Communications Corp., Regent Communications Inc., Radio One Inc., and Saga Communications Inc.

Named Executive Officer Compensation

The Company’s Named Executive Officer compensation consists of four elements: base salary; annual cash incentive (bonus) awards; long-term incentive compensation, usually in the form of stock options; and perquisites and benefits. The Committee assesses each of these elements independently from the other elements to ensure that the amount paid to each Named Executive Officer for each compensation element is reasonable and, as a function of overall compensation paid, ensures that compensation for each Named Executive Officer is reasonable in its totality.

Distribution of Compensation

The percentage of the Company’s annual total compensation, consisting of base salary, annual cash incentive (bonus) awards, and long-term incentive compensation is shown in the table below for each Named Executive Officer. This distribution of compensation elements reflects the Committee’s emphasis on aligning compensation with the interests of the Company’s stockholders, and the Committee’s desire to balance short-term and long-term incentives. Other factors the Committee considers in determining the appropriate distribution of compensation for the Company’s executives include executive preference, age, career status, historic practices and internal equity.

For 2006, total compensation for the Company’s Named Executive Officers was distributed as follows:


Named Executive Officer	Base Salary		Annual Cash Incentive (Bonus) Awards		Long-Term Incentive Compensation		Other Compensation		Total
Mr. Epperson	46.6	%	6.7	%	41.3	%	5.4	%	100	%
Mr. Atsinger	39.1	%	11.5	%	45.3	%	4.1	%	100	%
Mr. Davis	45.6	%	12.7	%	37.4	%	4.3	%	100	%
Mr. Evans	32.5	%	5.6	%	57.9	%	4.0	%	100	%
Mr. Adair	70.4	%	14.2	%	8.9	%	6.5	%	100	%

Employment Agreements

Each of the Company’s Named Executive Officers except Mr. Adair is employed pursuant to employment agreements with three year terms. Each of the agreements provides for a contractual level of base salary. Mr. Epperson’s current agreement was entered into as of July 1, 2004, and will expire on June 30, 2007. Mr. Atsinger’s current agreement was entered into as of July 1, 2004, and will expire on June 30, 2007. Mr. Davis’ current agreement was entered into as of April 1, 2005, and will expire on March 31, 2008. Mr. Evan’s current agreement was entered into as of September 1, 2005, and will expire on August 30, 2008. The Committee is currently in the process of negotiating new agreements with Messrs. Epperson and Atsinger.

Base Salary

When determining recommended base salaries for the Company’s Named Executive Officers, the Committee generally evaluates salaries of the peer companies described in the section of this Proxy Statement entitled “COMPENSATION DISCUSSION & ANALYSIS—General Discussion—Benchmarking” above.

Where appropriate, adjustments are made to reflect the Company’s relative position within the peer group. The Committee also considers other factors including: individual contribution and performance; Company performance; market conditions; retention needs; experience; succession planning; historic practices; and internal equity.

Increases in the base salaries of the Company’s Named Executive Officers for 2006 were made pursuant to the terms of the agreements described in the section of this Proxy Statement entitled “COMPENSATION DISCUSSION & ANALYSIS—Named Executive Officer Compensation—Employment Agreements” above, except for Mr. Adair. Mr. Adair’s base salary is adjusted annually and his annual base salary was increased in early 2006 by 4.9%, which the Committee believed to be appropriate based on an overall assessment of peer companies, his expertise, and the contributions he made to the Company during 2005.

Annual Cash Incentive (Bonus) Awards

All of the Company’s Named Executive Officers are eligible to receive discretionary bonuses. The amount to be paid as a bonus, if any, to any Named Executive Officer is determined after a review of the Company’s performance and the performance of each individual Named Executive Officer. Ordinarily, this determination is made in the first quarter of each year, following completion of the Company’s financial statements for the prior year.

Incentive Compensation Pool

Annual cash incentive (bonus) awards are granted to Named Executive Officers from a target cash incentive (bonus) pool which is established at the beginning of the prior year. Over the course of such year the Committee adjusts the size of the pool to reflect the financial performance of the Company. Although the Company may pay an aggregate amount of annual cash incentive (bonus) award that is less than the full amount set forth in the pool, it generally does not pay and has not paid an aggregate amount that is greater than that which is in the pool.

Performance Measures and Award Payments

The Committee considers many factors when assessing the amount of any Named Executive Officer’s annual cash incentive (bonus) awards. The Committee has significant flexibility in awarding cash bonuses. The Company believes that this flexibility, and the Company’s history of rewarding performance, provide a strong motivating incentive to the Company’s Named Executive Officers to perform in a manner that will help the Company continue to achieve its goals and objectives.

Given the changing nature and complexities of the media industry, the Committee’s decision to increase or decrease cash bonuses from year to year is generally based upon a variety of factors deemed appropriate by the Committee including the financial performance of the Company and the individual areas of responsibility of each Named Executive Officer. The Committee considers: earnings per share; return on invested capital; EBIDTA growth; same station revenue growth; same station SOI growth; non-broadcast EBITDA; relative stock price growth; and audience growth.

Incentive (Bonus) Awards Earned in 2006

Based on the financial performance of the Company, the Committee’s consideration of the factors described in the section of this Proxy Statement entitled “COMPENSATION DISCUSSION & ANALYSIS—Named Executive Officer Compensation—Performance Measures and Award Payments” above, and Company management’s recommendations, the actual bonuses paid to each Named Executive Officer in 2006 for performance in 2005 were $100,000 for Mr. Epperson, $250,000 for Mr. Atsinger, $100,000 for Mr. Davis, $75,000 for Mr. Evans, and $66,014 for Mr. Adair.

Long-Term Incentive Compensation

The Company believes that equity-based compensation helps ensure that the interests of the Named Executive Officers are aligned with those of the Company’s stockholders. The Company also believes that

equity-based compensation is a material element of compensation required to recruit and retain key executives and remain competitive with the Company’s peers. Lastly, the Company uses equity-based compensation, in particular stock options with long-term vesting, to incentivize long-term retention of key executives.

Stock Options

The Company’s equity-based compensation program is governed by the Stock Plan adopted by the board of directors and last approved by the Company’s stockholders on May 18, 2005. The Stock Plan calls for stock options to be granted with exercise prices equal to the market price of the Company’s class A common stock on the date of grant. All stock options granted by the Company generally have value only if the market price of the class A common stock has increased by the time the options vest and are exercised. The Company’s option grants generally vest ratably over four years. Because the stock options do not have value unless the stock price increases above the grant date price, the Committee believes that stock options are a useful motivational tool.

In determining the size of stock option grants to Named Executive Officers, the Committee: (a) compares equity-based compensation awards to individuals holding comparable positions in the Company’s peer group; (b) evaluates the Black-Scholes valuation of potential stock option grants; (c) reviews Company performance against annual performance goals; and (d) reviews individual performance against the individual’s annual incentive bonus objectives.

In 2006, Mr. Epperson was awarded 30,000 stock options, Mr. Atsinger was awarded 75,000 stock options, Mr. Davis was awarded 25,000 stock options, Mr. Evans was awarded 20,000 stock options, and Mr. Adair was awarded 5,000 stock options.

Perquisites and Benefits

The Company provides its Named Executive Officers with perquisites and employee benefits. Except as specifically noted elsewhere in this Proxy Statement, the employee benefits programs in which the Company’s Named Executive Officers participate (which provide benefits such as medical coverage, dental coverage, life insurance, disability insurance and annual contributions to a qualified 401(k) retirement plan) are generally the same programs offered to substantially all of the Company’s salaried employees.

Perquisites

The Committee does not view perquisites as a significant element of its overall compensation structure, but it does believe that providing perquisites can be a useful tool in attracting, motivating and retaining executive talent. The Company provided certain perquisites to its Named Executive Officers in 2006 as summarized below:

Use of Vehicles

Each of the Company’s Named Executive Officers except for Mr. Evans is provided with either a car allowance or vehicle provided by the Company. The Committee based its determination to offer these perquisites primarily due to the use of these vehicles for Company purposes and based upon a comparison of comparable perquisites at peer companies.

Supplemental Medical, Travel and Expense Reimbursement for Mr. Atsinger

In addition to the basic group medical plan offered all employees, Mr. Atsinger receives reimbursement for all travel and medical expenses incurred by him for any medical treatment elected by him. This perquisite includes all medical expenses that are not covered under the Company’s medical benefits or plans. The Company may elect to provide this perquisite by obtaining supplemental medical insurance covering Mr. Atsinger at the Company’s cost or reimbursing Mr. Atsinger for any health, dental or vision expenses incurred by him that are

not covered by the Company’s medical benefits programs. The Company also provides full reimbursement to Mr. Atsinger for any income or employment taxes applicable to this perquisite.

Payment of Filing and Regulatory Fees

The Company pays for the preparation of all regulatory and government filings required to be made by the Named Executive Officers solely as a result of their position as officers or directors of the Company or of the Company’s wholly-owned subsidiary Salem Communications Holding Corporation. The Company also pays for the preparation and filing of all regulatory filings (including without limitation Hart-Scott-Rodino Act filing fees) Mr. Epperson or Mr. Atsinger are required to make as a result of the exercise of options granted to them for the purchase of the Company’s stock. The Committee’s determination to provide this perquisite to Messrs. Epperson and Atsinger was based on the possibility that such filings will need to be made if either Mr. Epperson or Mr. Atsinger elects to exercise any of their vested outstanding stock options.

Mr. Adair’s Country Club Membership

To match a perquisite provided to him by his previous employer, the Company pays dues for a country club membership for Mr. Adair.

Supplemental Life Insurance Coverage for Mr. Evans

To match a perquisite provided to him by his previous employer, and in addition to the basic life insurance provided by the Company to all employees, the Company pays the premiums for term life insurance covering Mr. Evans in the amount of Two Million Five Hundred Thousand Dollars ($2,500,000).

Split-Dollar Life Insurance

Since 2003, the Company has maintained separate split-dollar life insurance policies covering Mr. and Mrs. Epperson and Mr. and Mrs. Atsinger, respectively, in the amount of $20,000,000 each. Pursuant to the terms of these policies, the Company will receive an amount equal to the sum of all premiums paid by the Company (without interest) through such date and the beneficiaries will receive all remaining insurance benefits under these policies.

Other Benefits

401(k) Plan

The Company maintains a 401(k) Plan. Participation in this 401(k) Plan by Named Executive Officers is on the same basis as the Company’s other full-time employees. The terms of the 401(k) Plan indicate that the Company will match employees’ contributions (subject to applicable legal limitations upon such contributions) as follows: (a) for 401(k) Plan contributions less than or equal to 3% of compensation, the Company will match employee contributions at a rate of fifty cents on the dollar, and (b) for 401(k) Plan contributions in excess of 3% and less than 6% of compensation, the Company will match employee contributions at a rate of twenty-five cents on the dollar. Company matching contributions vest ratably in equal installments of one-third each over a three-year period beginning on the employee’s date of hire, such that after three years an employee is 100% vested in Company matching contributions. All Company matches to 401(k) Plan contributions made by the Named Executive Officers are fully vested.

Medical, Dental, Life Insurance and Disability Coverage

The Company provides full reimbursement of all premiums paid by the Named Executive Officers for medical, dental, life and disability coverage benefits provided to the Named Executive Officers and their dependants.

Deferred Compensation Plans

The Company offers a deferred compensation plan for management-level employees including the Named Executive Officers. Under this plan, participants are permitted to defer a portion of their income for specific time periods. The Company’s obligations under the deferred compensation plan are unsecured.

Severance and Change-in-Control Benefits

Change in Control Agreements

The Company has not entered into change-in-control agreements with any of the Company’s elected corporate officers, including each of the Named Executive Officers.

Severance and Other Termination Agreements

Upon certain types of terminations of employment (other than a termination following a change in control of the Company), severance benefits may be paid to the Named Executive Officers. The severance benefits payable to Messrs. Epperson, Atsinger, Davis and Evans are addressed in their respective employment agreements and each of them would receive the benefits provided to him under their specific agreement. Mr. Adair is not covered under a general severance plan and any severance benefits payable to him would be determined by the Committee in its discretion. The severance and termination payments and benefits that would occur in the event of termination of employment of Messrs. Epperson, Atsinger, Davis or Evans are more fully described in the section of this Proxy Statement entitled “EXECUTIVE COMPENSATION—Potential Payments to the Company’s Named Executive Officers Upon Termination or Change in Control” below.

Tax Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code of 1986, as amended, places a limit of One Million Dollars ($1,000,000) on the amount of compensation that the Company may deduct in any one year with respect to the Company’s CEO and each of the Company’s other four most highly paid executive officers.

The Committee believes that tax deductibility is an important factor, but only one factor, to be considered when evaluating its compensation policies and practices. While the Company’s compensation practices have generally been designed and implemented in a manner which would maintain tax deductibility, the Committee believes that the interests of the Company may be better served by providing compensation that is not fully tax deductible. Based on the Company’s current compensation plans and policies and proposed regulations interpreting the Internal Revenue Code, however, the Committee believes that, for the near future, any loss in tax deductibility for executive compensation will not be material in amount.

Security Ownership Requirements/Guidelines

The Corporate Governance Principles adopted by the Company’s board of directors encourage Company executives and board members to purchase shares of the Company’s stock. The board of directors recognizes, however, that the number of shares of Company stock owned by any executive or director is a personal decision. Accordingly, the Company has determined not to adopt a policy requiring ownership by its Named Executive Officers or directors of a minimum number of shares of Company stock.

COMPENSATION COMMITTEE REPORT

This Compensation Committee Report shall not be deemed soliciting material or to be filed with the Securities and Exchange Commission (“SEC”), nor shall any information in this report be incorporated by reference by any general statement into any past or future filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except to the extent that Salem Communications Corporation and its subsidiaries (the “Company”) specifically incorporates this information by reference into such filing, and shall not otherwise be deemed filed under such Acts.

The Compensation Committee has reviewed and discussed the Compensation, Discussion & Analysis which appears above with management, and, based on such review and discussion, the Compensation Committee recommended to the Company’s Board of Directors that the above disclosure be included in this Definitive Proxy Statement filed on Schedule 14A under the Securities Exchange Act of 1934, as amended.

The Compensation Committee is currently comprised of Roland S. Hinz, Chairman, David Davenport and Richard A. Riddle.

COMPENSATION COMMITTEE

Roland S. Hinz, Chairman

David Davenport

Richard A. Riddle

April 20, 2007

EXECUTIVE COMPENSATION

Summary Compensation Table

The table below summarizes the total compensation paid to or earned by the Named Executive Officers for the Company’s fiscal year ended December 31, 2006:


Name and Principal Positions	Salary ($)	Bonus ⁽¹⁾ ($)	Option Awards ^(2),(3) ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings ⁽⁴⁾ ($)	All Other Compensation ^(5),(6) ($)	Total ($)
Stuart W. Epperson Chairman of the Board	700,000	100,000	620,479	—	82,059	1,502,538
Edward G. Atsinger III President, CEO and Director	850,000	250,000	986,246	—	89,342	2,175,588
Joe D. Davis EVP and COO	358,750	100,000	294,261	14,246	19,705	786,962
David A.R. Evans EVP—Business Development and CFO	436,667	75,000	778,572	31,637	22,585	1,344,461
Robert C. Adair SVP, Operations	326,724	66,014	40,722	—	30,333	463,793

(1)

Amounts set forth in the Bonus column represent bonuses paid by the Company in 2006 for performance in 2005. Bonuses are given at the discretion of the Company and are not earned by Company employees until they are paid.

(2)

Amounts set forth in the Option Awards column represent the aggregate amount recognized for financial statement reporting purposes with respect to the Named Executive Officers for the fiscal year ended December 31, 2006, disregarding the estimate of forfeitures related to service-based vesting conditions, but otherwise computed in accordance with the Statement of Financial Accounting Standards (“SFAS”) No. 123, as amended by SFAS No. 123(R), “Share-Based Payment,” (“SFAS 123R”) based upon assumptions set forth in Note 7 to the Company’s consolidated financial statements filed with the SEC on Form 10-K on March 16, 2007. For additional information regarding option awards, see the section of this Proxy Statement entitled “COMPENSATION DISCUSSION & ANALYSIS—Long Term Incentive Compensation—Stock Options” above and the tables entitled “Grants of Plan-Based Awards” and “Outstanding Equity Awards at Fiscal Year End” below.

(3)

Other than the following option awards forfeited by Mr. Davis and Mr. Evans, there were no option award forfeitures by the Named Executive Officers during the Company’s fiscal year ended December 31, 2006: (a) Mr. Davis forfeited 800 options with an exercise price of $21.15 because the grants for these options expired on June 22, 2006; (b) Mr. Davis forfeited an additional 2,000 options with an exercise price of $22.50 because the grants for these options expired on July 1, 2006; and (c) Mr. Evans forfeited 2,400 options with an exercise price of $21.15 because the grants for these options expired on June 22, 2006.

(4)

Amounts set forth in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column include only above-market earnings (interest in excess of 120% of the federal long-term rate) during the fiscal year ended December 31, 2006 on compensation deferred by Messrs. Davis and Evans on a basis that is not tax-qualified.

(5)

Amounts set forth in the All Other Compensation column consist of the following:


Item	Mr. Epperson ($)	Mr. Atsinger ($)	Mr. Davis ($)	Mr. Evans ($)	Mr. Adair ($)
Perquisites and Other Personal Benefits	71,529	78,768	4,200	2,714	14,567
Company Contributions to 401(k) Plan	—	—	4,950	4,950	4,950
Medical, Dental, Life and Disability Premiums	10,530	10,574	10,555	14,921	10,816
TOTAL	82,059	89,342	19,882	22,585	30,333

(6)

Includes the following perquisites and personal benefits which have been valued by the Company based upon the incremental cost to the Company of providing these perquisites and personal benefits to the Named Executive Officers:


Perquisite or Personal Benefit	Mr. Epperson ($)	Mr. Atsinger ($)	Mr. Davis ($)	Mr. Evans ($)	Mr. Adair ($)
Personal Use of Company Vehicle	17,384	13,725	N/A	N/A	N/A
Automobile Allowance	N/A	N/A	4,200	N/A	8,748
Split-Dollar Life Insurance Premiums	54,145	60,385	N/A	N/A	N/A
Supplemental Medical, Travel and Expense Reimbursement	N/A	4,658	N/A	N/A	N/A
Club Dues	N/A	N/A	N/A	N/A	5,819
Supplemental Life Insurance Premiums	N/A	N/A	N/A	2,714	N/A
TOTAL	71,529	78,768	4,200	2,714	14,567

Grants of Plan-Based Awards in 2006

The Committee granted stock options to each Named Executive Officer on March 15, 2006 under the Stock Plan. The Named Executive Officers were awarded the number of stock options shown in the table below. This table shows all options to purchase the Company’s Class A common stock granted to each of the Named Executive Officers in 2006.

GRANT OF PLAN-BASED AWARDS(1)

Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards

Estimated Future Payouts
Under Equity Incentive Plan
Awards

Option Awards (2)

Name

Grant
Date

Threshold
($)

Target
($)

Maximum
($)

Threshold
(#)

Target
(#)

Maximum
(#)

All
Other
Stock
Awards:
Number
of
Shares
of Stock
Units

(#)

All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)

Exercise
or Base
Price of
Option
Awards
($/sh)

Grant
Date Fair
Value of
Stock and
Option
Awards(3)

($)

Stuart W. Epperson

3/15/06

N/A

30,000

13.51

252,669

Edward G. Atsinger III

3/15/06

N/A

75,000

13.51

631,673

Joe D. Davis

3/15/06

N/A

25,000

13.51

210,558

David A. R. Evans

3/15/06

N/A

20,000

13.51

168,446

Robert C. Adair

3/15/06

N/A

5,000

13.51

42,112

(1)

Awards granted under the Company’s Stock Plan.

(2)

All stock options granted hereunder are service-based awards to purchase shares of the Company’s Class A common stock pursuant to the terms of the Stock Plan. The options vest ratably in equal 25% installments of the first, second, third and fourth anniversary of the option grant date, with each installment expiring on the fifth anniversary of its vest date.

(3)

The value for the stock option awards listed in this column is calculated as the total grant date fair market value determined on an aggregate basis for each award in accordance with SFAS 123R based upon assumptions set forth in Note 7 to the Company’s consolidated financial statements filed with the Securities and Exchange Commission on Form 10-K on March 16, 2007, but disregarding estimates of forfeitures related to service-based vesting conditions.

Outstanding Equity Awards at Fiscal Year-End

The following table provides information as of December 31, 2006, in respect of shares of the Company’s Class A common stock that may be issued under the Stock Plan, the Company’s only existing equity compensation plan.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

Name

Option Awards

Stock Awards

Number of
Securities
Underlying
Unexercised
Options
(#)

Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)

Option
Exercise
Price
($)

Option
Expiration
Date

Number of
Shares or
Units of
Stock
That Have
Not
Vested
(#)

Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
(#)

Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)

Exercisable

Unexercisable

Stuart W. Epperson

10,500

23.07

5/6/2007

N/A

17,892

25.50

3/8/2009

N/A

100,000

29.41

6/17/2009

N/A

100,000

29.41

6/17/2010

N/A

100,000

29.41

6/17/2011

N/A

13,838

22.70

5/18/2010

N/A

6,250

16.75

5/18/2011

N/A

6,250

(1)

16.75

5/18/2012

N/A

6,250

(1)

16.75

5/18/2013

N/A

6,250

(1)

16.75

5/18/2014

N/A

7,500

(1)

13.51

3/15/2012

N/A

7,500

(1)

13.51

3/15/2013

N/A

7,500

(1)

13.51

3/15/2014

N/A

7,500

(1)

13.51

3/15/2015

N/A

Edward G. Atsinger III

15,000

23.07

5/6/2007

N/A

24,850

25.50

3/8/2009

N/A

133,333

29.41

6/17/2009

N/A

133,333

29.41

6/17/2010

N/A

133,334

29.41

6/17/2011

N/A

41,515

22.70

5/18/2010

N/A

12,500

16.75

5/18/2011

N/A

12,500

(2)

16.75

5/18/2012

N/A

12,500

(2)

16.75

5/18/2013

N/A

12,500

(2)

16.75

5/18/2014

N/A

18,750

(2)

13.51

3/15/2012

N/A

18,750

(2)

13.51

3/15/2013

N/A

18,750

(2)

13.51

3/15/2014

N/A

18,750

(2)

13.51

3/15/2015

N/A

Joe D. Davis

2,000

22.50

7/1/2007

N/A

2,000

22.50

7/1/2008

N/A

2,000

22.50

7/1/2009

N/A

2,500

11.81

9/6/2007

N/A

2,500

11.81

9/6/2008

N/A

2,500

11.81

9/6/2009

N/A

6,250

22.42

12/14/2010

N/A

6,250

22.42

12/14/2011

N/A

6,250

(3)

22.42

12/14/2012

N/A

6,250

(3)

22.42

12/14/2013

N/A

Name

Option Awards

Stock Awards

Number of
Securities
Underlying
Unexercised
Options
(#)

Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)

Option
Exercise
Price
($)

Option
Expiration
Date

Number of
Shares or
Units of
Stock
That Have
Not
Vested
(#)

Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
(#)

Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)

Exercisable

Unexercisable

1,200

23.07

5/6/2007

N/A

1,025

25.50

3/8/2009

N/A

5,000

22.70

5/18/2010

N/A

750

16.75

5/18/2011

N/A

750

(3)

16.75

5/18/2012

N/A

750

(3)

16.75

5/13/2013

N/A

750

(3)

16.75

5/18/2014

N/A

7,500

19.37

11/9/2011

N/A

7,500

(3)

19.37

11/9/2012

N/A

7,500

(3)

19.37

11/9/2013

N/A

7,500

(3)

19.37

11/9/2014

N/A

6,250

(3)

13.51

3/15/2012

N/A

6,250

(3)

13.51

3/15/2013

N/A

6,250

(3)

13.51

3/15/2014

N/A

6,250

(3)

13.51

3/15/2015

N/A

David A. R. Evans

6,250

11.50

9/15/2007

N/A

6,250

11.50

9/15/2008

N/A

6,250

11.50

9/15/2009

N/A

1,250

13.50

1/25/2007

N/A

1,250

13.50

1/25/2008

N/A

1,250

13.50

1/25/2009

N/A

1,250

13.50

1/25/2010

N/A

10,000

22.42

12/14/2010

N/A

10,000

22.42

12/14/2011

N/A

10,000

(4)

22.42

12/14/2012

N/A

10,000

(4)

22.42

12/14/2013

N/A

375

23.07

5/6/2007

N/A

6,800

16.20

3/24/2008

N/A

12,018

23.35

9/11/2009

N/A

8,934

23.35

9/11/2010

N/A

8,210

23.35

9/11/2011

N/A

8,210

(4)

23.35

9/11/2012

N/A

8,210

(4)

30.00

9/11/2013

N/A

8,210

(4)

30.00

9/11/2014

N/A

8,210

(4)

30.00

9/11/2015

N/A

8,210

(4)

30.00

9/11/2016

N/A

482

23.35

9/11/2009

N/A

3,566

23.35

9/11/2010

N/A

4,290

23.35

9/11/2011

N/A

4,290

(4)

23.35

9/11/2012

N/A

4,290

(4)

30.00

9/11/2013

N/A

4,290

(4)

30.00

9/11/2014

N/A

4,290

(4)

30.00

9/11/2015

N/A

4,290

(4)

30.00

9/11/2016

N/A

359

25.50

3/8/2009

N/A

5,000

29.41

6/17/2009

N/A

5,000

22.70

5/18/2010

N/A

750

16.75

5/18/2011

N/A


Name	Option Awards							Stock Awards
	Number of Securities Underlying Unexercised Options (#)	Number of Securities Underlying Unexercised Options (#)		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price ($)		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested (#)	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#)
	Exercisable	Unexercisable			Option Exercise Price ($)		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)
		750	(4)		$	16.75	5/18/2012	N/A	N/A	N/A	N/A
		750	(4)		$	16.75	5/18/2013	N/A	N/A	N/A	N/A
		750	(4)		$	16.75	5/18/2014	N/A	N/A	N/A	N/A
	12,500				$	19.02	9/1/2011	N/A	N/A	N/A	N/A
		12,500	(4)		$	19.02	9/1/2012	N/A	N/A	N/A	N/A
		12,500	(4)		$	19.02	9/1/2013	N/A	N/A	N/A	N/A
		12,500	(4)		$	19.02	9/1/2014	N/A	N/A	N/A	N/A
		12,500	(4)		$	19.02	9/1/2015	N/A	N/A	N/A	N/A
		12,500	(4)		$	19.02	9/1/2016	N/A	N/A	N/A	N/A
		12,500	(4)		$	19.02	9/1/2017	N/A	N/A	N/A	N/A
		12,500	(4)		$	19.02	9/1/2018	N/A	N/A	N/A	N/A
		5,000	(4)		$	13.51	3/15/2012	N/A	N/A	N/A	N/A
		5,000	(4)		$	13.51	3/15/2013	N/A	N/A	N/A	N/A
		5,000	(4)		$	13.51	3/15/2014	N/A	N/A	N/A	N/A
		5,000	(4)		$	13.51	3/15/2015	N/A	N/A	N/A	N/A
Robert C. Adair	1,250				$	13.50	1/25/2010	N/A	N/A	N/A	N/A
	1,000				$	25.18	12/24/2009	N/A	N/A	N/A	N/A
	1,000				$	25.18	12/24/2010	N/A	N/A	N/A	N/A
	1,000				$	25.18	12/24/2011	N/A	N/A	N/A	N/A
		1,000	(5)		$	25.18	12/24/2012	N/A	N/A	N/A	N/A
	1,250				$	16.75	5/18/2011	N/A	N/A	N/A	N/A
		1,250	(5)		$	16.75	5/18/2012	N/A	N/A	N/A	N/A
		1,250	(5)		$	16.75	5/18/2013	N/A	N/A	N/A	N/A
		1,250	(5)		$	16.75	5/18/2014	N/A	N/A	N/A	N/A
		1,250	(5)		$	13.51	3/15/2012	N/A	N/A	N/A	N/A
		1,250	(5)		$	13.51	3/15/2013	N/A	N/A	N/A	N/A
		1,250	(5)		$	13.51	3/15/2014	N/A	N/A	N/A	N/A
		1,250	(5)		$	13.51	3/15/2015	N/A	N/A	N/A	N/A

(1)

Mr. Epperson’s unexercisable options vest as follows: (a) 6,250 on May 18, 2007, (b) 6,250 on May 18, 2008, (c) 6,250 on May 18, 2009, (d) 7,500 on March 15, 2007, (e) 7,500 on March 15, 2008, (f) 7,500 on March 15, 2009, and (g) 7,500 on March 15, 2010.

(2)

Mr. Atsinger’s unexercisable options vest as follows: (a) 12,500 on May 18, 2007, (b) 12,500 on May 18, 2008, (c) 12,500 on May 18, 2009, (d) 18,750 on March 15, 2007, (e) 18,750 on March 15, 2008, (f) 18,750 on March 15, 2009, and (g) 18,750 on March 15, 2010.

(3)

Mr. Davis’ unexercisable options vest as follows: (a) 6,250 on December 14, 2007, (b) 6,250 on December 14, 2008, (c) 750 on May 18, 2007, (d) 750 on May 18, 2008, (e) 750 on May 18, 2009, (f) 7,500 on November 9, 2007, (g) 7,500 on November 9, 2008, (h) 7,500 on November 9, 2009, (i) 6,250 on March 15, 2007, (j) 6,250 on March 15, 2008, (k) 6,250 on March 15, 2009, and (l) 6,250 on March 15, 2010.

Mr. Evans’ unexercisable options vest as follows: (a) 10,000 on December 14, 2007, (b) 10,000 on December 14, 2008, (c) 12,500 on September 11, 2007, (c) 12,500 on September 11, 2008, (d) 12,500 on September 11, 2009, (e) 12,500 on September 11, 2010, (f) 12,500 on September 11, 2011, (g) 750 on May 18, 2007, (h) 750 on May 18, 2008, (i) 750 on May 18, 2009, (j) 12,500 on September 1, 2007, (k) 12,500 on September 1, 2008, (l) 12,500 on September 1, 2009, (m) 12,500 on September 1, 2010, (n) 12,500 on September 1, 2011, (o) 12,500 on September 1, 2012, (p) 12,500 on September 1, 2013, (q) 5,000 on March 15, 2007, (r) 5,000 on March 15, 2008, (s) 5,000 on March 15, 2009, and (t) 5,000 on March 15, 2010.

(5)

Mr. Adair’s unexercisable options vest as follows: (a) 1,000 on December 24, 2007, (b) 1,250 on May 18, 2007, (c) 1,250 on May 18, 2008, (d) 1,250 on May 18, 2009, (e) 1,250 on March 15, 2007, (f) 1,250 on March 15, 2008, (g) 1,250 on March 15, 2009, and (h) 1,250 on March 15, 2010.

Option Exercises and Stock Vested

The following table sets forth the stock options exercised by the Named Executive Officers in 2006. None of the Named Executive Officers have received stock awards. Accordingly, no vesting of stock awards occurred in 2006.

OPTION EXERCISES AND STOCK VESTED


	Option Awards		Stock Awards
Name	Number of Shares Acquired on Exercise (#)	Value Realized on Exercise ($)	Number of Shares Acquired on Vesting (#)	Value Realized on Vesting ($)
Stuart W. Epperson	—	—	N/A	N/A
Edward G. Atsinger III	—	—	N/A	N/A
Joe D. Davis	—	—	N/A	N/A
David A. R. Evans	6,250	5,145	N/A	N/A
Robert C. Adair	—	—	N/A	N/A

Non-Qualified Deferred Compensation Plan

The Company’s Named Executive Officers are eligible to participate in a non-qualified deferred compensation plan administered by the Company, whereby a Named Executive Officer may elect to defer a portion of his cash compensation by designating such compensation to be deposited in a deferred compensation account established under the Company’s plan. The following table shows the deferred compensation activity for Named Executive Officers during 2006.

NONQUALIFIED DEFERRED COMPENSATION


Name	Executive Contributions in Last FY(1) ($)	Registrant Contributions in Last FY ($)	Aggregate Earnings in Last FY(2) ($)	Aggregate Withdrawals/ Distributions in Last FY ($)	Aggregate Balance at Last FYE ($)(3)
Stuart W. Epperson	—	—	—	—	—
Edward G. Atsinger III	—	—	—	—	—
Joe D. Davis	59,612	—	27,980	—	290,365
David A. R. Evans	59,312	—	51,812	—	420,038
Robert C. Adair	—	—	—	—	—

(1)

Executive contributions for Mr. Davis represent deferral of $40,612 of salary and $19,000 of bonus. Executive contributions for Mr. Evans represent deferral of $21,812 of salary and $37,500 of bonus.

(2)

Preferential earning for Mr. Davis of $14,246 under the Company’s non-qualified deferred compensation plan are included as compensation in the Summary Compensation Table. Preferential earnings for Mr. Evans of $31,637 under the Company’s non-qualified deferred compensation plan are included as compensation in the Summary Compensation Table.

(3)

All amounts in the aggregate balance for Messrs. Davis and Evans were included in the Summary Compensation Table for previous years, except for 2006 preferential earnings which are included in footnote 2 above.

The primary purpose of the Company’s non-qualified deferred compensation plan is to allow plan participants to defer payment of up to 100% of base salary and bonus compensation until retirement or other employment termination. Plan participants may also elect an in-service distribution during a designated calendar

year. Payment is made, at the participant’s election, in a single sum or equal annual installment payments over a five-year period commencing at: (a) retirement after age 60, (b) or one year thereafter, or (c) the date previously elected by the plan participant; provided, however, that distribution in a single sum is automatically made on termination of employment for reasons other than retirement or disability. Previously established plan payment dates may, under certain circumstances, be deferred by participants but such payment dates may not be voluntarily accelerated after they have been designated by a participant. Plan participants may elect to have their contributions in investments that are offered to all plan participants by the plan administrator. Plan accounts are 100% vested at all times. The plan constitutes a fully funded, non-qualified deferred compensation plan that benefits certain designated employees who are within a select group of key management or highly compensated employees.

Potential Payments to the Company’s Named Executive Officers upon Termination or Change in Control

Mr. Atsinger’s and Mr. Epperson’s Employment Agreements

Under the terms of their agreements, if Mr. Atsinger’s or Mr. Epperson’s employment is terminated by reason of death, his estate is entitled to receive: (a) a payment equal to his base salary through the date of termination to the extent not already paid, (b) a prorated portion of his incentive bonus based on his prior year’s incentive bonus, (c) his actual earned incentive bonus for any period not already paid, (d) amounts to which he is entitled under the Company’s benefit plans, (e) immediate, 100% vesting of outstanding unvested stock options and other equity-based awards, and (f) continued coverage of his dependants by the Company’s health benefit plans for a period of twelve (12) months.

If Mr. Atsinger’s or Mr. Epperson’s employment is terminated upon disability (as defined in the agreement), he is entitled to receive: (a) a payment equal to his base salary through the date of termination to the extent not already paid, (b) a severance payment equal to 100% of his then current annual base salary for a period of fifteen (15) months, (c) a prorated portion of his incentive bonus based on his prior year’s incentive bonus, (d) his actual earned incentive bonus for any period not already paid, (e) amounts to which he is entitled under the Company’s benefit plans, and (f) immediate, 100% vesting of outstanding unvested stock options and other equity-based awards.

If Mr. Atsinger’s or Mr. Epperson’s employment is terminated by the Company without cause (as defined in the agreement), he is entitled to receive: (a) a payment equal to his base salary earned but unpaid through the date of termination, (b) a prorated portion of his incentive bonus based on the prior year’s incentive bonus, and any incentive bonus amount earned but not yet paid, and, (c) a payment equal to his then current annual base salary for a period of six (6) months.

With the exception of any continued benefits coverage in the event of the death of Mr. Epperson or Mr. Atsinger, all payments to be made by the Company upon termination of employment to Messrs. Epperson or Atsinger will be lump sum payments.

The agreements also contain provisions that: (a) grant the Company a right of first refusal on all corporate opportunities presented to the executives; (b) restrict Mr. Atsinger’s and Mr. Epperson’s ability to engage in any business that is competitive with the Company’s business for a period of two years following retirement or termination for cause or without good reason; and (c) restrict Mr. Atsinger’s and Mr. Epperson’s ability to interfere with the business of the Company or solicit Company employees for a period of two years following such retirement or termination. Compliance by Messrs. Atsinger and Epperson with these obligations is a material condition to the Company’s obligation to provide the above termination benefits.

Mr. Davis’ and Mr. Evans’ Employment Agreements

Under the terms of their agreements, if the executives’ employment is terminated by reason of death, disability or otherwise for cause (as defined in the agreement), he or his estate is entitled to receive: (a) a

payment equal to his base salary through the date of termination to the extent not already paid, and (b) his actual earned incentive bonus for any period not already paid.

In addition, if either of these agreements is terminated without cause (as defined in the agreements), certain stock option awards made to each of these executives on December 21, 2001, shall have an accelerated vesting schedule (with such options ratably vesting at a rate of 12.5% per year commencing on December 21, 2002 rather than ratably vesting at a rate of 25% per year commencing on December 21, 2005) and the unexercised portion of such options, based upon the accelerated vesting schedule, shall expire and become unexercisable one (1) year from the termination date.

If Mr. Davis’ employment is terminated by the Company without cause (as defined in the agreement), he is also entitled to receive: (a) a payment equal to his base salary earned but unpaid through the date of termination, (b) his actual earned incentive bonus for any period not already paid, (c) a severance payment in an amount equal to the base salary Mr. Davis would have otherwise received through March 31, 2008 had he remained employed with the Company, and (d) professional outplacement assistance for twelve (12) consecutive months from the termination date.

If Mr. Evans’ employment is terminated by the Company without cause (as defined in the agreement), he is also entitled to receive: (a) a payment equal to his base salary earned but unpaid through the date of termination, (b) his actual earned incentive bonus for any period not already paid, (c) a severance payment in an amount equal to the base salary Mr. Evans would have otherwise received for a period of nine (9) months from the date of termination had he remained employed with the Company, and (d) professional outplacement assistance for twelve (12) consecutive months from the termination date.

With the exception of professional outplacement services that would be provided by the Company to Messrs. Davis and Evans over a one-year in the event of a termination without cause, all payments to be made by the Company upon termination of employment to Messrs. Davis or Evans would be lump sum payments.

The agreements with Mr. Davis and Mr. Evans also contain provisions that restrict their ability to interfere with the business of the Company or solicit Company employees for a period of six (6) months following termination of employment for any reason. Compliance by Messrs. Davis and Evans with these obligations is a material condition to the Company’s obligation to provide the above termination benefits.

Payments in the Event of Death

The following table sets forth the estimated value of payments that the estate of the Company’s Named Executive Officers would be entitled to receive assuming a death occurring as of December 31, 2006 and that the price per share of the Company’s class A common stock is $11.95, which is an amount equal to the stock’s NASDAQ market closing price on December 29, 2006.


Name	Value of Salary Continuation ($)	Value of Earned Incentive Bonuses ($)	Value of Equity Awards Vesting on Termination ($)	Value of Continued Benefits Coverage ($)	TOTAL ($)
Mr. Epperson	13,462	100,000	93,701	7,878	215,041
Mr. Atsinger	16,346	250,000	220,976	7,878	495,200
Mr. Davis	7,196	100,000	N/A	N/A	107,196
Mr. Evans	8,654	75,000	N/A	N/A	83,654
Mr. Adair	N/A	N/A	N/A	N/A	N/A

Payments in the Event of Disability

The following table sets forth the estimated value of benefits that the Company’s Named Executive Officers would be entitled to receive assuming a disability occurring as of December 31, 2006.

Disability as defined in the employment agreements for Messrs. Epperson and Atsinger generally means any mental or physical impairment which prevents the executive at any time during the Term from performing the essential functions of his full duties for a period of 180 days within any 270 day period and the executive fails to return to work within 10 days of notice by the Company of its intention to terminate employment. Disability as defined in the employment agreements for Messrs. Davis and Evans generally means any mental or physical impairment which prevents the executive from performing the essential functions of his full duties for a period of 90 days at anytime during the Term.


Name	Value of Salary Continuation and Severance ($)	Value of Earned Incentive Bonuses ($)	Value of Equity Awards Vesting on Termination ($)	Value of Benefits Coverage ($)	TOTAL ($)
Mr. Epperson	888,462	100,000	93,701	N/A	1,082,163
Mr. Atsinger	1,078,846	250,000	220,976	N/A	1,549,822
Mr. Davis	7,196	100,000	N/A	N/A	107,196
Mr. Evans	8,654	75,000	N/A	N/A	83,654
Mr. Adair	N/A	N/A	N/A	N/A	N/A

Payments in the Event of Termination Without Cause

The following table sets forth the estimated value of benefits that the Company’s Named Executive Officers would be entitled to receive assuming a termination without cause occurring as of December 31, 2006.

Termination for cause generally means: (a) death; (b) disability (as generally defined above); (c) continued gross negligence, malfeasance or gross insubordination in performing duties assigned to the executive; (d) a conviction of a crime involving moral turpitude; (e) an egregious act of dishonesty in connection with employment or a malicious act toward Company or its subsidiaries, (f) a violation of the confidentiality provisions contained in the employment agreement, (g) a willful breach of the employment agreement; (h) disloyalty; or (i) material and repeated failure to carry out reasonably assigned duties or instructions consistent with the executive’s position.

Name

Value of Salary
Continuation
and Severance

($)

Value of
Earned
Incentive
Bonuses

($)

Value of Equity
Awards Vesting
on Termination

($)

Value of
Benefits
Coverage

($)

Value of
Outplacement
Services

($)

TOTAL

($)

Mr. Epperson

363,462

100,000

N/A

463,462

Mr. Atsinger

441,346

250,000

N/A

691,346

Mr. Davis

474,946

100,000

89,455

N/A

3,100

667,501

Mr. Evans

346,154

75,000

171,877

N/A

3,100

596,131

Mr. Adair

N/A

EQUITY COMPENSATION PLAN INFORMATION

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information as of December 31, 2006 with respect to shares of our Class A common stock that may be issued under the Company’s Stock Plan, our only existing equity compensation plan. The Stock Plan was adopted by our board of directors and approved by our stockholders on May 25, 1999. On March 20, 2003, the board of directors approved an amendment to the Stock Plan to reserve an additional 600,000 shares of the Company’s Class A common stock for issuance under the Stock Plan. The amendment was approved by a vote of the stockholders at the Company’s annual meeting of stockholders held on June 11, 2003. On November 10, 2004 the Company’s stockholders approved an amendment to the Stock Plan to reserve an additional 1,500,000 shares of the Company’s Class A common stock for issuance under the Stock Plan. The amendment was approved by a vote of the stockholders at the Company’s Annual Meeting of Stockholders held on May 18, 2005.


	Equity Compensation Plan Information
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights		Remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)		(c)
Equity compensation plans approved by security holders	2,152,564	$	22.24	750,586
Equity compensation plans not approved by security holders	—		—	—

Total	2,152,564	$	22.24	750,586

DIRECTOR COMPENSATION

Non-employee directors of the Company receive an annual retainer and fees. In addition, and as a means to better align the interests of the Company’s non-employee directors with the Company’s stockholders, the Company provides a portion of each such director’s compensation in Company equity. The following table sets forth the compensation paid to or earned by the Company’s non-employee directors in 2006:


Name	Fees Earned or Paid in Cash ($)	Stock Awards ^(1),(2) ($)	Option Awards ^(3),(4) ($)	Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	TOTAL ⁽⁵⁾ ($)
David Davenport	41,000	17,548	5,770	—	—	—	64,318
Eric H. Halvorson	45,500	17,548	5,770	—	—	—	68,818
Roland S. Hinz	45,500	17,548	5,770	—	—	—	68,818
Judge Paul Pressler	39,000	17,548	5,770	—	—	—	62,318
Richard A. Riddle	45,000	17,548	5,770	—	—	—	68,318
Dennis M. Weinberg	40,000	3,568	5,770	—	—	—	49,338

(1)

Amounts set forth in the Stock Awards column represent the aggregate amount recognized for financial statement reporting purposes with respect to all outstanding restricted stock held by the non-employee directors as of the fiscal year ended December 31, 2006, disregarding the estimate of forfeitures related to service-based vesting conditions, but otherwise computed in accordance with SFAS 123R based upon assumptions set forth in Note 7 to the Company’s consolidated financial statements filed with the Securities and Exchange Commission on Form 10-K on March 16, 2007.

The total grant date fair market value determined on an aggregate basis for each restricted stock award made in 2006 in accordance with SFAS 123R based upon assumptions set forth in Note 7 to the Company’s consolidated financial statements filed with the Securities and Exchange Commission on Form 10-K on March 16, 2007, but disregarding estimates of forfeitures related to service-based vesting conditions, as computed by the Company based upon the closing stock price on the grant date, was as follows:


Grant Date	Shares (#)	Value ($)	Director
09/06/2006	1,000	11,150	David Davenport
09/06/2006	1,000	11,150	Eric H. Halvorson
09/06/2006	1,000	11,150	Roland S. Hinz
09/06/2006	1,000	11,150	Judge Paul Pressler
09/06/2006	1,000	11,150	Richard A. Riddle
09/06/2006	1,000	11,150	Dennis M. Weinberg

(2)

There were no stock award forfeitures by the non-employee directors during the Company’s fiscal year ended December 31, 2006.

(3)

Amounts set forth in the Option Awards column represent the aggregate amount recognized for financial statement reporting purposes with respect to the non-employee directors for the fiscal year ended December 31, 2006, disregarding the estimate of forfeitures related to service-based vesting conditions, but otherwise computed in accordance with SFAS 123R based upon assumptions set forth in Note 7 to the Company’s consolidated financial statements filed with the Securities and Exchange Commission on Form 10-K on March 16, 2007. For additional information regarding option awards, see the section of this Proxy Statement entitled “COMPENSATION DISCUSSION & ANALYSIS—Long Term Compensation—Stock Options” above.

The total grant date fair market value determined on an aggregate basis for each option award made in 2006 in accordance with SFAS 123R based upon assumptions set forth in Note 7 to the Company’s consolidated

financial statements filed with the Securities and Exchange Commission on Form 10-K on March 16, 2007, but disregarding estimates of forfeitures related to service-based vesting conditions, as computed by the Company based upon the closing stock price on the grant date, was as follows:


Grant Date	Shares (#)	Value ($)	Director
09/06/2006	1,000	16,920	David Davenport
09/06/2006	1,000	16,920	Eric H. Halvorson
09/06/2006	1,000	16,920	Roland S. Hinz
09/06/2006	1,000	16,920	Judge Paul Pressler
09/06/2006	1,000	16,920	Richard A. Riddle
09/06/2006	1,000	16,920	Dennis M. Weinberg

(4)

Other than the following option awards forfeited by Mr. Hinz and Mr. Riddle, there were no option award forfeitures by the non-employee directors during the Company’s fiscal year ended December 31, 2006: (a) Mr. Hinz and Mr. Riddle each forfeited 800 options with an exercise price of $22.50 because the grants for these options expired on July 1, 2006; and (b) Mr. Hinz and Mr. Riddle each forfeited an additional 2,000 options with an exercise price of $11.8125 because the grants for these options expired on September 6, 2006.

(5)

As of December 31, 2006, the Company’s non-employee directors held the following interests in the Company’s class A common stock:


Name	Stock Options (#)	Restricted Shares(1) (#)	Shares Owned Outright (#)	Shares Owned Indirectly (#)	TOTAL (#)
David Davenport	9,500	1,000	—	500	11,000
Eric H. Halvorson	12,000	1,000	—	2,500	15,500
Roland S. Hinz	14,400	1,000	12,339	53,833	81,572
Judge Paul Pressler	9,500	1,000	—	—	10,500
Richard A. Riddle	14,400	1,000	8,889	44,778	69,067
Dennis M. Weinberg	1,000	—	16,640	—	17,640

(1)

The restricted shares listed in the above table have vested as of October 13, 2006. In addition to these vested shares, each of the non-employee directors received a grant of 1,000 restricted shares on September 6, 2006 which grants will vest on September 6, 2007 if the grantee remains a director of the Company as of that date. All of the restricted grants: (a) are Class A common stock of the Company that entitle the grantee immediately upon vesting the right to vote the shares and to participate in any dividend paid on Class A common stock; and (b) may not be sold or transferred by the grantee after vesting until the sooner to occur of the fifth anniversary of the grant date or the date that the grantee ceases for any reason to be a member of the Company’s board of directors.

The cash compensation paid in 2006 to the Company’s non-employee directors (“Designated Directors”) as approved by the Company’s board of directors at the recommendation of the Committee is as follows:


COMPENSATION	AMOUNT		PAYABLE TO	PAYABLE
Annual Retainer	$	25,000	Designated Directors	Quarterly

Attendance Fee (Full Company Board)	$	2,500	Designated Directors	Per Regularly Scheduled Company Board Meeting

Attendance Fee (Board Committee)	$	1,000	Designated Director Committee Members	Per Regularly Scheduled Committee Meeting

Chairperson Fee (Audit and Compensation Committees)	$	1,500	Chairperson of Audit and Compensation Committees	Per Regularly Scheduled Committee Meeting

Chairperson Fee (Nominating and Corporate Governance Committee)	$	1,000	Chairperson of Nominating and Corporate Governance Committee	Per Regularly Scheduled Committee Meeting

Designated Directors who are also chairmen of the Company’s board committees shall receive the applicable chairperson fee in addition to a committee attendance fee for each regularly scheduled Company board committee meeting. Designated Directors shall also receive reimbursement for all reasonable out-of- pocket expenses in connection with travel to and attendance at regularly scheduled Company board and board committee meetings.

Company directors who are also employees of the Company (Stuart W. Epperson, Chairman of the Board, and Edward G. Atsinger III, CEO and President) are not additionally compensated for their services as directors. Compensation for Messrs. Epperson and Atsinger is summarized in the “Summary Compensation Table” appearing in this Proxy Statement under the heading “EXECUTIVE COMPENSATION.”

AUDIT COMMITTEE REPORT

This Audit Committee Report shall not be deemed soliciting material or to be filed with the Securities and Exchange Commission (“SEC”), nor shall any information in this report be incorporated by reference by any general statement into any past or future filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except to the extent that Salem Communications Corporation and its subsidiaries specifically incorporates this information by reference into such filing, and shall not otherwise be deemed filed under such Acts.

The purpose of the Audit Committee (the “Committee”) is to oversee, on behalf of the entire board of directors (the “Board”): (a) the accounting and financial reporting processes of the Company, (b) the audits of the Company’s financial statements, (c) the qualifications of the public accounting firm engaged as the Company’s independent registered public accounting firm to prepare or issue an audit report on the financial statements of the Company, and (d) the performance of the Company’s internal auditor and independent registered public accounting firm.

The Committee has adopted, and annually reviews, a charter outlining the practices it follows. The charter complies with all current regulatory requirements, including requirements pertaining to the NASD listing standards definitions, provisions and applicable exceptions concerning the independence of audit committee members.

In 2006, the Committee held four meetings, all of which were regularly scheduled. The Committee’s meeting agendas are established by the Committee chairman based upon the Committee’s charter and an annual meeting planner approved by the entire Committee. At each of these meetings, the Committee met with the

senior members of the Company’s financial management team and General Counsel. Additionally, the Company’s independent registered public accounting firm met with the full Committee at all four of the meetings. The full Committee also met in executive session with the Company’s independent registered public accounting firm at all four meetings. Prior to each regularly scheduled meeting, the Chairman of the Committee also met privately with the Company’s independent registered public accounting firm at which times candid discussions of financial management, accounting and internal control issues took place.

The Company’s management is primarily responsible for the preparation, presentation, and integrity of the Company’s financial statements, accounting and financial reporting principles, internal controls, and procedures designed to ensure compliance with accounting standards, applicable laws, and regulations. As the Company’s independent registered public accounting firm, Ernst & Young LLP is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with generally accepted accounting standards and for expressing an opinion on the conformity of the audited financial statements to accounting principles generally accepted in the United States of America.

The Committee has reviewed and discussed with management the Company’s audited financial statements as of and for the year ended December 31, 2006. The Committee has also discussed with the independent registered public accounting firm the matters required to be discussed by: (a) the Statement on Auditing Standards No. 61, as amended by Statement on Auditing Standards No. 90 (regarding “Communications with Audit Committees”), and as further amended, by the Auditing Standards Board of the American Institute of Certified Public Accountants, and (b) Securities and Exchange Commission (“SEC”) Regulation S-X, Rule 2-07.

The Committee has received and reviewed the written disclosures and the letter from the independent registered public accounting firm required by Independence Standards Board Standard No. 1 (“Independence Discussions with Audit Committees”), as amended, by the Independence Standards Board, and the Committee has discussed with the independent registered public accounting firm that firm’s independence from the Company and its management. The Committee has also considered whether the independent registered public accounting firm’s provision of non-audit services to the Company is compatible with the auditor’s independence.

Based on the Committee’s reviews and discussions referred to above, the Committee recommended to the Board that the audited consolidated financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, to be filed with the SEC.

The Audit Committee is currently comprised of Eric H. Halvorson, Chairman, Richard A. Riddle and Dennis M. Weinberg.

AUDIT COMMITTEE

Eric H. Halvorson, Chairman

Richard A. Riddle

Dennis M. Weinberg

April 20, 2007

STOCK PRICE PERFORMANCE GRAPH

The graph below compares the cumulative total stockholder return of the Company’s Class A common stock with the cumulative total return of the NASDAQ—NMS equity index and the Bloomberg Inside Radio Index for a five year period commencing December 31, 2001 and ending December 31, 2006. The Company’s Class B common stock is not publicly traded and is not registered. The graph assumes that the value of an investment in the Company’s Class A common stock and each index was $100 on December 31, 2001 and that any dividends were reinvested. Other than a special cash dividend of $0.60 per share paid on July 28, 2006, no cash dividends have been declared on the Company’s Class A common stock since the Company’s initial public offering. Stockholder returns over the indicated period should not be considered indicative of future stockholder returns.

LOGO

For purposes of this Proxy Statement, and until otherwise noted in subsequent Company disclosures, the company is using the Bloomberg Inside Radio Index as its comparative index for purposes of the stock price performance graph above. The reason for this change from the prior year’s Proxy Statement is that the Bloomberg Broadcast and Cable Radio Index is no longer published.

The stock price performance graph above shall not be deemed incorporated by reference by any general statement incorporating by reference this report into any filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates this information by reference and shall not otherwise be deemed filed under such Acts.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the beneficial ownership of the Company’s Class A and Class B common stock as of April 13, 2007 (unless otherwise indicated) by: (a) each person believed by the Company to be the beneficial owner of more than 5% of either class of the outstanding Class A or Class B common stock; (b) each director; (c) each of the Named Executive Officers; and (c) all directors and executive officers as a group.


	Class A Common Stock				Class B Common Stock				Votes of All Classes of Common Stock(2)
Name and Address(1)	Number		% Vote(2)		Number		% Vote(2)		Votes of All Classes of Common Stock(2)
Stuart W. Epperson	4,243,906	(3)	22.76	%	2,776,848	(4)	50.00	%	43.15	%
Nancy A. Epperson	2,884,656	(3)	15.77	%	2,776,848	(4)	50.00	%	41.52	%
Edward G. Atsinger III	4,462,845	(5)	23.73	%	2,776,848	(5)	50.00	%	43.36	%
Edward C. Atsinger	1,093,078	(6)	5.97	%	—		—		1.48	%
Joe D. Davis	47,275	(7)	*		—		—		*
David A.R. Evans	121,959	(8)	*		—		—		*
Robert C. Adair	8,400	(9)	*		—		—		*
David Davenport	11,000	(10)	*		—		—		*
Eric H. Halvorson	15,500	(11)	*		—		—		*
Roland S. Hinz	83,427	(12)	*		—		—		*
Paul Pressler	10,500	(13)	*		—		—		*
Richard A. Riddle	69,067	(14)	*		—		—		*
Dennis M. Weinberg	17,640	(15)	*		—		—		*
All directors and executive officers as a group (12 persons)	9,110,689		46.94	%	5,553,696		100.00	%	86.26	%
Brown Brothers Harriman & Co.	1,288,000	(16)	7.04	%	—		—		1.74	%
140 Broadway
New York, NY 10005
Columbia Wanger Asset Management, L.P.	3,313,700	(17)	18.11	%	—		—		4.49	%
227 West Monroe St., Suite 3000
Chicago, IL 60606
Epperson Children’s Trusts	1,007,520	(18)	5.51	%	—		—		1.37	%
Gamco Investors, Inc., et al	959,250	(19)	5.24	%	—		—		1.30	%
One Corporate Center
Rye, NY 10580

Less than 1%.

(1)

Except as otherwise indicated, the address for each person is c/o Salem Communications Corporation, 4880 Santa Rosa Road, 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 13, 2007 are deemed outstanding for the purposes of calculating the number and percentage ownership 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 18,296,324 shares of Class A common stock and 5,553,696 shares of Class B common stock all of which were outstanding as of April 13, 2007, 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. and Mrs. Epperson are trustees 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. Includes: (a) 351,730 shares of Class A common stock subject to options that are exercisable within 60 days; and (b) 3,660,217 shares of Class A common stock that are pledged to secure a personal loan.

(4)

Includes shares of Class B common stock held by a trust of which Mr. and Mrs. Epperson are trustees.

(5)

These shares of Class A and Class B common stock are held by trusts of which Mr. Atsinger is trustee. Includes: (a) 510,115 shares of Class A common stock subject to options that are exercisable within 60 days; and (b) 3,365,191 shares of Class A common stock that are pledged to secure a personal loan.

(6)

Includes 1,090,078 shares of Class A common stock held in a trust for the benefit of Edward C. Atsinger, who is Edward G. Atsinger III’s son. Edward G. Atsinger III is the trustee of the trust and these shares are included in the shares beneficially owned by Edward G. Atsinger III as reflected in this table. Of these shares, 502,539 shares are pledged to secure Edward G. Atsinger III’s personal loan. Also includes 3,000 shares of Class A common stock held by a trust for the benefit of Edward C. Atsinger. Edward C. Atsinger and his wife are trustees of the trust. These 3,000 shares are not included in shares beneficially owned by Edward G. Atsinger III as reflected in this table.

(7)

Includes 44,775 shares of Class A common stock subject to options that are exercisable within 60 days. Includes 2,500 shares of Class A common stock held by a trust for which Mr. Davis is trustee

(8)

Includes 2,450 shares of Class A common stock held by a trust for which Mr. Evans is trustee, 600 shares held in custody for his minor daughter and 2,750 shares held by Mr. Evans’ spouse as a joint tenant with Mr. Evans’ father-in-law. Mr. Evans disclaims beneficial ownership of all of the 2,750 shares of Class A common stock beneficially owned by his father-in-law. Includes 116,159 shares of Class A common stock subject to options that are exercisable within 60 days.

(9)

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

(10)

Includes 9,500 shares of Class A common stock subject to options that are exercisable within 60 days. Includes 500 shares of Class A common stock held in a trust for which Mr. Davenport is a trustee.

(11)

Includes: (a) 2,500 shares of Class A common stock held by a trust for which Mr. Halvorson and his wife are trustees; and (b) 12,000 shares of Class A common stock subject to options that are exercisable within 60 days.

(12)

Includes 1,411 shares held by Mr. Hinz’s wife and 444 shares held by Mr. Hinz’s son. Mr. Hinz disclaims beneficial ownership of shares of Class A common stock held by his wife and his son. Includes 14,400 shares of Class A common stock subject to options that are exercisable within 60 days.

(13)

Includes 9,500 shares of Class A common stock subject to options that are exercisable within 60 days.

(14)

Includes 44,778 shares of Class A common stock held by a trust for which Mr. Riddle is trustee. Includes 14,400 shares of Class A common stock subject to options that are exercisable within 60 days.

(15)

Includes 1,000 shares of Class A common stock subject to options that are exercisable within 60 days.

(16)

This information is based on a Schedule 13G/A filed by Brown Brothers Harriman & Co. (“BBHC”), 1818 Master Partners, Ltd. (“1818”), Richard H. Witmer (“RHW”) and Timothy E. Hartch (“TEH” and, together with RHW, 1818 and BBHC, “Brown Brothers”), with the SEC on August 1, 2006. Brown Brothers reported that as of August 1, 2006, it was the beneficial owner of 1,288,000 shares of our issued and outstanding Class A common stock. Brown Brothers reported that it has shared voting power and shared dispositive power with respect to 1,288,000 shares.

(17)

This information is based on the Schedule 13G/A filed by Columbia Wanger Asset Management, L.P. (“CWAM”) and Columbia Acorn Trust (“Acorn” and, together with CWAM, “Columbia”), with the SEC on January 10, 2007. Columbia reported that as of December 31, 2006, it had sole voting power with respect to 2,953,700 shares, shared voting power with respect to 360,000 shares and sole dispositive power with respect to 3,313,700 shares.

(18)

The shares of Class A common stock are held by the Kathryn Epperson Fonville Trust u/d/t 3/31/99, Stuart W. Epperson, Jr. Trust u/d/t 3/31/99, Kristine J. Epperson McBride Trust u/d/t 3/31/99 and Karen Epperson DeNeui Trust u/d/t 3/31/99 (collectively the “Trusts”). There is a voting arrangement in place whereby a majority of the shares held collectively by the Trusts must be voted in order for all the shares of the Trusts to be voted. All of these shares are pledged to secure Stuart W. Epperson’s personal loan.

(19)

This information is based on a Schedule 13D filed on January 22, 2007, which indicates that such Schedule 13D has been filed by Mario J. Gabelli (“Mario Gabelli”) and various entities that he directly or indirectly controls or for which he acts as chief investment officer. The Schedule 13D indicates that Mario Gabelli is deemed to have beneficial ownership of the shares owned beneficially by each of the filing persons. Each of the Reporting Persons and Covered Persons (both as defined in the Schedule 13D) has the sole power to vote or direct the vote and sole power to dispose or to direct the disposition of the shares reported for it, either for its own benefit or for the benefit of its investment clients or its partners, as the case may be, except as noted in the Schedule 13D.

RELATED PARTY TRANSACTIONS

Leases With Principal Stockholders

As of April 13, 2007, the Company leases the studios and tower and antenna sites described in the table below from Messrs. Atsinger and Epperson or trusts or partnerships created for the benefit of Messrs. Atsinger and Epperson and their families. All such leases have cost of living adjustments. Based upon management’s assessment and analysis of local market conditions for comparable properties, the Company believes that such leases do not have terms that vary materially from those that would have been available from unaffiliated parties.


Market	Station Call Letters	Facilities Leased	Annual Rental(1)		Expiration Date(2)
Leases with both Messrs. Atsinger and Epperson:
Los Angeles, CA	KTIE-AM	Office/Studios	$	26,736	2021
San Francisco, CA	KFAX-AM	Antenna/Tower		178,788	2013
Philadelphia, PA	WFIL-AM/WNTP-AM	Antenna/Tower/Studios		135,646	2014
Houston-Galveston, TX	KNTH-AM	Antenna/Tower		39,504	2015
	KTEK-AM	Antenna/Tower		20,026	2018
Seattle-Tacoma, WA	KGNW-AM	Antenna/Tower		44,208	2012
	KLFE-AM	Antenna/Tower		32,132	2014
Minneapolis-St. Paul, MN	KKMS-AM/KYCR-AM	Antenna/Tower/Studios		163,908	2016
Pittsburgh, PA	WORD-FM	Antenna/Tower		33,324	2013
Denver-Boulder, CO	KRKS-AM	Antenna/Tower		70,248	2009
	KNUS-AM	Antenna/Tower		23,088	2016
Portland, OR	KPDQ-AM	Antenna/Tower		17,208	2012
Sacramento, CA	KFIA-AM	Antenna/Tower		104,604	2016
San Antonio, TX	KSLR-AM Day site	Antenna/Tower		39,276	2017
	KSLR-AM Night site	Antenna/Tower		12,060	2009
Phoenix, AZ	KPXQ-AM	Antenna/Tower		47,713	2010
Orlando, FL	WTLN-AM	Tower/Transmitter		80,004	2045

			$	1,068,473

Lease with Mr. Atsinger:
San Diego, CA	KPRZ-AM	Antenna/Tower	$	125,212	2028

			$	1,193,685

(1)

Annual rent is calculated as of December 31, 2006.

(2)

The expiration date reported for certain facilities represents the expiration date assuming exercise of all lease term extensions at Salem’s option.

Rental expense paid by the Company to Messrs. Atsinger and Epperson or trusts or partnerships created for the benefit of their families for 2006 amounted to approximately $1.1 million. Rental expense paid by the Company to Mr. Atsinger or trusts created for the benefit of his family for 2006 amounted to approximately $0.1 million.

Radio Stations Sold to Chesapeake-Portsmouth Broadcasting Corporation

In December, 2006, the Company sold radio stations WJGR-AM, Jacksonville, Florida, WZAZ-AM, Jacksonville, Florida and WZNZ-AM, Jacksonville, Florida, for a total amount of $2,825,000 to Chesapeake-Portsmouth Broadcasting Corporation, a company owned by Mrs. Nancy A. Epperson, the wife of Stuart W. Epperson. Prior to closing, the buyer operated the radio stations pursuant to a Local Programming and Marketing Agreement (“LMA”) for which the buyer paid the Company $35,686. At the time of the sale and LMA, and pursuant to the procedures for review of related party transactions set forth in the section of this Proxy Statement entitled “RELATED PARTY TRANSACTIONS-Procedures for Review, Approval or Ratification of Related Party Transactions”, below, the Company obtained independent appraisals of the radio stations and determined that the terms of the transactions were no less favorable to the Company than those that would be available in a comparable transaction in arm’s length dealings with an unrelated third party.

Radio Stations Owned by the Eppersons

Nancy A. Epperson, the wife of the Chairman of the Board, Stuart W. Epperson, currently serves as an officer, director and stockholder of several radio broadcasting entities as follows:

•

Secretary, Treasurer, and a director of Truth Broadcasting Corporation, licensee of WLVA-AM, Lynchburg, Virginia, WDRU-AM, Wake Forest, North Carolina, WTRU-AM, Kernersville, North Carolina, WKEW-AM, Greensboro, North Carolina, WPOL-AM, Winston-Salem, North Carolina, and WZRH-AM, Dallas, North Carolina.

•

President, a director and 100% stockholder of Chesapeake-Portsmouth Broadcasting Corporation, licensee of WBOB-AM (formerly WJGR-AM), Jacksonville, Florida, WZNZ-AM, Jacksonville, Florida, WTJZ-AM, Newport News, Virginia, WLES-AM, Lawrenceville, Virginia, WPMH-AM, Claremont, Virginia, and broker of airtime on WRJR-AM, Portsmouth, Virginia, WVAB-AM, Virginia Beach, Virginia and WBVA-AM, Bayside, Virginia. Chesapeake-Portsmouth Broadcasting Corporation is also a 50% member of Northeast Florida Radio LLC, permittee of 20010817AAf-AM, Nassau Village-Ratliff, Florida.

•

President and a director of Delmarva Educational Association, licensee of noncommercial radio station WAZP-FM, Cape Charles, Virginia and noncommercial radio station WWIP-FM, Cheriton, Virginia, and

•

President and a director of The River Media, Inc. (formerly New Covenant Educational Ministries, Inc.), licensee of noncommercial radio station WCRJ-FM, Jacksonville, Florida, and noncommercial station WAYL-FM, St. Augustine, Florida.

These Florida, North Carolina and Virginia markets are not currently served by stations owned and operated by the Company. Acquisitions in such markets are not part of the Company’s current business and acquisition strategies. Under his employment agreement, Mr. Epperson is required to offer the Company a right of first refusal of opportunities related to the Company’s business.

Radio Stations Owned by Mr. Hinz

Mr. Hinz, a director of the Company, through companies or entities controlled by him, operates the following radio stations in Southern California: (a) KLTX-AM, Long Beach, California, and KEZY-AM, San Bernardino, California (which were acquired from the Company in August 2000 and December 2001, respectively); and (b) KSDO-AM, San Diego, California. These radio stations are formatted in Christian Teaching and Talk programming in the Spanish language.

Truth For Life—Mr. Hinz and Mr. Weinberg

Mr. Hinz and Mr. Weinberg are members of the board of directors of Truth For Life, a non-profit organization that is a substantial customer of the Company. During 2006, the Company was paid approximately $2.0 million by Truth for Life for airtime.

Split-Dollar Life Insurance

In 1997, the Company purchased split-dollar life insurance policies for its Chairman and Chief Executive Officer. The premiums were $219,000, $230,000 and $230,000 for the years ended December 31, 2004, 2005 and 2006, respectively. The amounts paid by the Company, which will be repaid by the beneficiaries of the insurance policies, have been reserved completely. On December 31, 2003, the Chairman and Chief Executive Officer transferred ownership of these insurance policies to the Company with the Company retaining the right to recover all amounts paid by the Company under said policies and the Chairman and Chief Executive Officer designating beneficiaries for the remainder of the policy proceeds.

Transportation Services Supplied by Atsinger Aviation

From time to time, the Company rents aircraft from a company which is owned by Mr. Atsinger. As approved by the independent members of the Company’s board of directors, the Company rents these aircraft on an hourly basis at what the Company believes are favorable rates and uses them for general corporate needs. Total rental expense for these aircraft for 2004, 2005 and 2006 amounted to approximately $297,000, $226,000 and $235,000, respectively.

Procedures for Review, Approval or Ratification of Related Party Transactions

The Company has a related party transactions policy. This policy provides that: related party transactions are subject to the prior approval of the Nominating and Corporate Governance Committee, and that related party transactions be cleared through the Secretary of the Company to ensure compliance with this policy.

Under this policy, our Nominating and Corporate Governance Committee reviews the material facts relating to all potential related party transactions and either approves or disapproves of the transaction, subject to certain exceptions. In determining whether to approve or ratify a related party transaction, the Nominating and Corporate Governance Committee will take into account, among other factors it deems appropriate, whether the related party transaction is on terms no less favorable to the Company than terms generally available from an unaffiliated third-party under the same or similar circumstances and the extent of the related party’s interest in the transaction.

THE COMPANY’S RELATIONSHIP WITH ITS INDEPENDENT PUBLIC ACCOUNTANTS

Principal Accountant Fees and Services

The following table summarizes the fees billed by the Company’s registered public accounting firm, Ernst & Young LLP, for professional services rendered during fiscal year 2006 and fiscal year 2005:


	Fees Paid During Year Ended
	December 31, 2006		December 31, 2005
Audit Fees(1)	$	722,974	$	738,053
Audit-Related Fees(2)	$	2,500	$	3,500
Tax Fees(3)	$	—	$	—
All Other Fees	$	—	$	—

Total Fees For Services(4)	$	725,474	$	741,553

(1)

Audit fees include fees associated with the audit of the Company’s annual financial statements; Sarbanes-Oxley Act Section 404 attest services; reviews of quarterly financial statements; and services that generally only the auditor can reasonably provide such as comfort letters, consents, and assistance with and review of documents filed with the SEC.

(2)

Audit-related fees include fees associated with accounting consultations.

(3)

Tax fees include services for tax compliance, tax advice and tax planning, except those provided in connection with the audit or quarterly reviews.

(4)

None of the fees listed in the table above were approved by the Audit Committee in reliance on a waiver from pre-approval under paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

Audit Committee’s Pre-Approval Policies and Procedures

In accordance with the Audit Committee’s pre-approval polices and procedures and the requirements of applicable law, all services to be provided by Ernst & Young LLP are pre-approved by the Audit Committee. Pre-approval includes audit services, audit-related services and other permissible non-audit services. Pre-approval is generally provided by the full Audit Committee for up to a year and is detailed as to the particular defined tasks or scope of work and is subject to a specific budget. In some cases, the Audit Committee has delegated authority to the Chairman of the Audit Committee to pre-approve additional services, and any such pre-approvals granted by the Chairman must then be communicated to the full Audit Committee at or prior to the next scheduled Audit Committee meeting. When assessing whether it is appropriate to engage the independent registered public accounting firm to perform a service, the Audit Committee considers, among other things, whether such services are consistent with the independent registered public accounting firm’s independence and whether such services constitute prohibited non-audit functions under Section 201 of the Sarbanes-Oxley Act of 2002. The Audit Committee considered the provision of the services listed in the table above by Ernst & Young LLP and determined that the provision of such services was compatible with maintaining the independence of Ernst & Young LLP.

PROPOSAL 1

ELECTION OF DIRECTORS

At the Annual Meeting, stockholders of the Company will be asked to vote on the election of eight directors. Two nominees are nominated as “Independent Directors” and shall be elected by the holders of Class A common stock as a class, exclusive of all of the holders of Class B common stock. Paul Pressler and David Davenport have been nominated as the Independent Directors. The nominees receiving the highest number of votes of shares entitled to vote for such directors at the Annual Meeting will be elected directors of the Company. To fill these board positions, unless indicated to the contrary, the enclosed proxy will be voted FOR the nominees listed

below, as listed on the enclosed proxy card for whom the stockholder is entitled to vote. All directors elected at the Annual Meeting will be elected to a one-year term and will serve until the annual meeting of stockholders to be held in the year 2008 or until their respective successors have been duly elected and qualified.

Set forth below are the names of persons nominated by the Company’s board of directors for election as directors at the Annual Meeting:

Stuart W. Epperson

Edward G. Atsinger III

David Davenport

Eric H. Halvorson

Roland S. Hinz

Paul Pressler

Richard A. Riddle

Dennis M. Weinberg

Your proxy, unless otherwise indicated, will be voted FOR each of the directors for whom you are entitled to vote, that is, as a Class A common stock holder FOR Messrs. Epperson, Atsinger, Davenport, Halvorson, Hinz, Pressler, Riddle and Weinberg; and as a Class B common stock holder FOR Messrs. Epperson, Atsinger, Halvorson, Hinz, Riddle and Weinberg. For a description of the nominees’ principal occupation and business experience during the last five years and present directorships, please see the section of this Proxy Statement entitled “THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS—Board of Directors,” above.

The Company has been advised by each nominee named in this Proxy Statement that he is willing to be named as such herein and is willing to serve as a director if elected. However, if any of the nominees should be unable to serve as a director, the enclosed proxy will be voted in favor of the remainder of those nominees not opposed by the stockholder on such proxy and may be voted for a substitute nominee selected by the board of directors.

Vote Required and Board of Directors’ Recommendation

The affirmative vote of a majority of the shares present or represented by proxy and entitled to vote at the meeting, at which a quorum representing a majority of the voting power of all outstanding shares of Class A common stock and Class B common stock is present and entitled to vote, is required to approve Proposal 1. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL 1.

STOCKHOLDERS’ PROPOSALS FOR 2008 PROXY STATEMENT

Any stockholder of the Company wishing to have a proposal considered for inclusion in the Company’s proxy solicitation materials relating to the Company’s 2008 annual meeting of stockholders must, in addition to other applicable requirements, give notice of such proposal in writing to the Secretary of the Company at its principal executive offices and such notice must be received on or before December 26, 2007. The proposal may be included in next year’s proxy statement if it complies with certain rules and regulations promulgated by the SEC. The board of directors will review proposals from eligible stockholders which it receives by December 26, 2007, and will determine whether any such proposal will be included in its 2008 proxy solicitation materials. Proposals must be submitted in accordance with the Company’s Bylaws and comply with SEC regulations promulgated pursuant to Rule 14a-8 of the Exchange Act.

OTHER MATTERS

At the time of preparation of this Proxy Statement, the board of directors of the Company was not aware of any other matters to be brought before the Annual Meeting. No eligible stockholder had submitted notice of any proposal 90 days before the date of the Annual Meeting. However, if any other matters are properly presented for action, in the absence of instructions to the contrary, it is the intention of the persons named in the enclosed form of proxy to vote, or refrain from voting, in accordance with their respective best judgment on such matters.

If a stockholder desires to have a proposal presented at the Company’s annual meeting of stockholders in 2008 and the proposal is not intended to be included in the Company’s related 2008 proxy solicitation materials, the stockholder must give advance notice to the Company in accordance with the Company’s Bylaws. Pursuant to the Company’s Bylaws, only such business shall be conducted, and only such proposals shall be acted upon at an annual meeting of stockholders as are properly brought before the meeting. For business to be properly brought before an annual meeting by a stockholder, in addition to any other applicable requirements, timely notice of the matter must first be given to the Secretary. To be timely, a stockholder’s written notice must be delivered to the Secretary at the Company’s principal executive offices not later than the 90th day nor earlier than the 120th day prior to the first anniversary of the preceding annual meeting; provided, however, that in the event the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, then notice of the stockholder proposal must be delivered to the Secretary not earlier than the 120th day nor later than the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such annual meeting is first made. If such proposal is for a nominee for director, such stockholder’s notice must set forth with respect to such director nominee all of the information relating to such person that is required to be disclosed in solicitations for elections of directors under the rules of the SEC; for any stockholder proposal, the notice must comply with Section 2.2 of Article II of the Company’s Bylaws (a copy of which is available upon request to the Secretary of the Company), which section requires that the notice contain a brief description of such proposal and the reasons for conducting such business at the annual meeting, the name and address, as they appear on the Company’s books, of the stockholder making such proposal, the number of shares of Class A common stock and Class B common stock beneficially owned by such stockholder and any material interest of such stockholder in such proposal.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Pursuant to Section 16(a) of the Exchange Act and the rules promulgated thereunder and applicable requirements of NASDAQ, officers and directors of the Company and persons who beneficially own more than 10% of the common stock of the Company are required to: (a) report their initial ownership and change in ownership with respect to all equity securities of the Company; and (b) furnish such reports to the Company.

Based solely on its review of the copies of such reports received by it during or with respect to the year ended December 31, 2006, and/or written representations from such reporting persons, the Company believes that its officers, directors and more than ten-percent stockholders complied with all Section 16(a) filing requirements applicable to such individuals.

ANNUAL REPORT ON FORM 10-K

The Company’s Annual Report on Form 10-K to Stockholders for the year ended December 31, 2006, including audited financial statements, is being sent to stockholders along with these proxy materials, but such Annual Report is not incorporated herein and is not deemed to be a part of this Proxy Statement. The Company’s Annual Report on Form 10-K for the year ended December 31, 2006, as filed with the SEC (without exhibits) is available to stockholders via the Company’s Internet website (www.salem.cc) or without charge on written request to the Company. Exhibits to the Annual Report on Form 10-K may be obtained from the Company upon payment of the Company’s reasonable expenses to furnish such exhibits. To obtain any of these materials, contact Jonathan L. Block, Salem Communications Corporation, 4880 Santa Rosa Road, Camarillo, California 93012.

By order of the board of directors,

LOGO

JONATHAN L. BLOCK

Secretary

Camarillo, California

April 27, 2007

PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY.

NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.

If you have any questions, or have any difficulty voting your shares, please telephone Jonathan L. Block of Salem at (805) 987-0400.


PROXY	SALEM COMMUNICATIONS CORPORATION	PROXY
	PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
	TO BE HELD JUNE 6, 2007
	SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby authorizes Edward G. Atsinger III and Jonathan L. Block, and each of them individually, with power of substitution, to vote and otherwise represent all of the shares of Class A common stock of Salem Communications Corporation (“Salem”), held of record by the undersigned, at the Annual Meeting of Stockholders of Salem to be held at the Westlake Village Inn, 31943 Agoura Road, Westlake Village, California 91361, on Wednesday, June 6, 2007, at 9:30 a.m. local time, and any adjournment(s) thereof, as indicated on the reverse side hereof.

The undersigned acknowledges receipt of the Notice of Annual Meeting and Proxy Statement dated, in each case, April 27, 2007. All other proxies heretofore given by the undersigned to vote shares of Salem’s Class A common stock are expressly revoked.

The shares represented by this proxy will be voted as described on the reverse hereof by the stockholder. If not otherwise directed, this proxy will be voted FOR the election as directors of all nominees nominated in Item 1 for which the stockholder is entitled to vote.


I plan to attend the Annual Meeting. ¨		(Continued, and to be signed on the reverse side.)

To include any comments, please mark this box. ¨ Address Change: ______________________ ______________________ ______________________ ______________________		SALEM COMMUNICATIONS CORPORATION C/O BANK OF NEW YORK 101 BARCLAY STREET – PROXY SERVICES NEW YORK, N.Y. 10286

Ú DETACH PROXY CARD HERE Ú

PLEASE MARK, DATE AND MAIL

THIS PROXY CARD PROMPTLY

USING THE ENCLOSED ENVELOPE.

x
Votes MUST be indicated
(x) in Black or Blue ink.

The BOARD OF DIRECTORS recommends a vote “FOR” the proposal.

1. To elect eight (8) members to

the Board of Directors of Salem:

FOR all nominees listed below for

whom stockholder is entitled to vote.†

WITHHOLD AUTHORITY to vote for all

nominees listed below for whom

stockholder is entitled to vote.†

* EXCEPTIONS


Nominees:	Stuart W. Epperson	Edward G. Atsinger III	David Davenport†	Eric H. Halvorson
	Roland S. Hinz	Paul Pressler†	Richard A. Riddle	Dennis M. Weinberg

† The holders of Salem’s Class A common stock are entitled to vote on the election of the two additional nominees as independent directors, Messrs. Davenport and Pressler.

(INSTRUCTIONS. To withhold authority to vote for any individual nominee, mark the “Exceptions” box and write that nominee’s name in the space provided below.)

* Exceptions

At their discretion, the proxies are authorized to consider and vote upon such other business as may properly come before the meeting or any adjournment thereof.

ADDRESS AREA

Please sign exactly as your name appears hereon. When signing in a representative capacity, please give full title.

Date:

Share Owner sign here

Co-Owner sign here


PROXY	SALEM COMMUNICATIONS CORPORATION	PROXY
	PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
	TO BE HELD JUNE 6, 2007
	SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby authorizes Edward G. Atsinger III and Jonathan L. Block, and each of them individually, with power of substitution, to vote and otherwise represent all of the shares of Class B common stock of Salem Communications Corporation (“Salem”), held of record by the undersigned, at the Annual Meeting of Stockholders of Salem to be held at the Westlake Village Inn, 31943 Agoura Road, Westlake Village, California 91361, on Wednesday, June 6, 2007, at 9:30 a.m. local time, and any adjournment(s) thereof, as indicated on the reverse side hereof.


I plan to attend the Annual Meeting. ¨		(Continued, and to be signed on the reverse side.)

To include any comments, please mark this box. ¨		SALEM COMMUNICATIONS CORPORATION C/O BANK OF NEW YORK 101 BARCLAY STREET – PROXY SERVICES NEW YORK, N.Y. 10286
Address Change: ______________________ ______________________ ______________________ ______________________

Ú DETACH PROXY CARD HERE Ú

PLEASE MARK, DATE AND MAIL

THIS PROXY CARD PROMPTLY

USING THE ENCLOSED ENVELOPE.

x
Votes MUST be indicated
(x) in Black or Blue ink.

The BOARD OF DIRECTORS recommends a vote “FOR” the proposal.

1. To elect six (6) members to

the Board of Directors of Salem:

FOR all nominees listed below for

whom stockholder is entitled to vote.†

WITHHOLD AUTHORITY to vote for all nominees listed below for whom stockholder is entitled to vote.†

* EXCEPTIONS


Nominees:	Stuart W. Epperson	Edward G. Atsinger III	Eric H. Halvorson
	Roland S. Hinz	Richard A. Riddle	Dennis M. Weinberg

† The holders of Salem’s Class A common stock are entitled to vote on the election of the two additional nominees as independent directors, Messrs. Davenport and Pressler.

(INSTRUCTIONS. To withhold authority to vote for any individual nominee, mark the “Exceptions” box and write that nominee’s name in the space provided below.)

* Exceptions

At their discretion, the proxies are authorized to consider and vote upon such other business as may properly come before the meeting or any adjournment thereof.

ADDRESS AREA

Please sign exactly as your name appears hereon. When signing in a representative capacity, please give full title.

Date:

Share Owner sign here

Co-Owner sign here