10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                          to                                          

Commission File Number 1-5846

THE LIBERTY CORPORATION

(Exact name of registrant as specified in its charter)

South Carolina	57-0507055
(State or other jurisdiction of incorporation or organization)	(IRS Employer identification No.)

135 South Main Street, Greenville, SC 29601

(Address of principal executive offices)

Registrant’s telephone number, including area code: 864/241-5400

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No þ

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock as of the latest practicable date.

	Number of shares Outstanding
Title of each class	as of September 30, 2005
Common Stock		18,301,958

TABLE OF CONTENTS

Ex-10

Ex-31

Ex-32

PART I, ITEM 1

FINANCIAL STATEMENTS

THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED BALANCE SHEETS

	September 30,			December 31,
(In 000’s)	2005			2004
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	19,978		$	16,389
Receivables (net of allowance for doubtful accounts)		38,188			41,576
Program rights		6,734			4,766
Prepaid and other current assets		3,521			6,077
Income taxes receivable		848			—
Deferred income taxes		2,587			2,453
Total current assets		71,856			71,261
Property, plant, and equipment
Land		5,636			5,636
Buildings and improvements		46,904			44,073
Furniture and equipment		179,737			172,993
Less: Accumulated depreciation		(147,243	)		(134,133	)
		85,034			88,569
Intangible assets subject to amortization (net of $706 and $701 accumulated amortization in 2005 and 2004, respectively)		288			234
FCC licenses		241,866			241,866
Goodwill		101,387			101,387
Investments and other assets		22,620			24,522
Total assets	$	523,051		$	527,839
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	18,659		$	21,396
Dividends payable		4,465			4,510
Program contract obligations		6,777			4,791
Accrued income taxes		—			3,573
Revolving credit facility		100,000			—
Total current liabilities		129,901			34,270
Unearned revenue		15,599			15,965
Deferred income taxes		60,678			60,187
Other liabilities		6,670			7,097
Revolving credit facility		—			20,000
Total liabilities		212,848			137,519
Shareholders’ equity
Common stock		42,636			49,273
Unearned stock compensation		(16,399	)		(17,396	)
Retained earnings		284,267			358,575
Unrealized investment losses		(301	)		(132	)
Total shareholders’ equity		310,203			390,320
Total liabilities and shareholders’ equity	$	523,051		$	527,839

See Notes to Consolidated and Condensed Financial Statements.

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THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In 000’s, except per share data)	2005			2004			2005			2004
				(Unaudited)
REVENUES
Television station revenues (net of commissions)	$	45,346		$	49,915		$	138,606		$	145,653
Cable advertising and other revenues (net of commissions)		3,405			3,691			9,969			10,821
Net revenues		48,751			53,606			148,575			156,474
EXPENSES
Operating expenses (exclusive of depreciation and amortization shown separately below)		31,099			32,045			93,873			94,725
Amortization of program rights		1,884			1,786			5,628			5,302
Depreciation and amortization of intangibles		4,970			5,321			14,669			14,860
Corporate, general, and administrative expenses		6,419			5,206			15,421			14,391
Total operating expenses		44,372			44,358			129,591			129,278
Operating income		4,379			9,248			18,984			27,196
Net investment income (loss)		(273	)		(22	)		2,011			(5,411	)
Interest expense		(1,002	)		(253	)		(2,274	)		(515	)
Income before income taxes		3,104			8,973			18,721			21,270
Provision for (Benefit from) income taxes		1,871			(3,229	)		5,715			1,382
NET INCOME	$	1,233		$	12,202		$	13,006		$	19,888
BASIC EARNINGS PER COMMON SHARE:	$	0.07		$	0.67		$	0.72		$	1.07
DILUTED EARNINGS PER COMMON SHARE:	$	0.07		$	0.66		$	0.72		$	1.07
Dividends per common share	$	0.25		$	0.25		$	0.75		$	0.75
Special dividend per common share	$	—		$	—		$	4.00		$	4.00

See Notes to Consolidated and Condensed Financial Statements.

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THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS

	Nine Months Ended September 30,
(In 000’s)	2005				2004
				(Unaudited)
OPERATING ACTIVITIES
Net income	$	13,006			$	19,888
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
(Gain) Loss on sale of operating assets		60				118
Realized investment (gains) losses		(1,090	)			6,382
Depreciation		14,498				14,722
Amortization of intangibles		171				138
Provision for bad debts		590				620
Amortization of program rights		5,628				5,302
Cash paid for program rights		(5,610	)			(5,492	)
Restricted stock amortization		4,044				2,426
Provision for (Benefit from) deferred income taxes		357				(7,783	)
Changes in operating assets and liabilities:
Receivables		2,798				2,209
Other assets		2,246				(3,386	)
Accounts payable and accrued expenses		(1,013	)			1,446
Accrued income taxes		(2,805	)			2,086
Unearned revenue		(366	)			1,651
Other liabilities		(427	)			451
All other operating activities		(225	)			425
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		31,862				41,203
INVESTING ACTIVITIES
Purchase of property, plant, and equipment		(11,158	)			(9,226	)
Proceeds from sale of property, plant, and equipment		135				163
Investments acquired		—				(750	)
Investments sold		2,285				11,257
Proceeds from sale of investment properties		—				1,055
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		(8,738	)			2,499
FINANCING ACTIVITIES
Proceeds from borrowings		242,000				105,000
Principal payments on debt		(162,000	)			(55,000	)
Dividends paid		(87,359	)			(89,142	)
Proceeds from the exercise of stock options		795				4,095
Repurchase of common stock		(12,971	)			(33,167	)
NET CASH PROVIDED BY(USED IN) FINANCING ACTIVITIES		(19,535	)			(68,214	)
INCREASE (DECREASE) IN CASH		3,589				(24,512	)
Cash at beginning of period		16,389				62,177
CASH AT END OF PERIOD	$	19,978			$	37,665

See Notes to Consolidated and Condensed Financial Statements.

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THE LIBERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
September 30, 2005
(Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated and condensed financial statements of The Liberty Corporation and Subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

The information included is not necessarily indicative of the annual results that may be expected for the year ended December 31, 2005, but does reflect all adjustments (which are of a normal and recurring nature) considered, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. In addition, the Company’s revenues are usually subject to seasonal fluctuations. The advertising revenues of the stations are generally highest in the second and fourth quarters of each year, due in part to increases in consumer advertising in the spring and retail advertising in the period leading up to and including the holiday season. Additionally, advertising revenues in even-numbered years tend to be higher as they benefit from advertising placed by candidates for political offices and demand for advertising time in Olympic broadcasts.

The December 31, 2004 financial information was derived from the Company’s previously filed 2004 Form 10-K. For further information, refer to the consolidated financial statements and footnotes thereto included in The Liberty Corporation annual report on Form 10-K for the year ended December 31, 2004. Certain reclassifications have been made in the previously reported financial statements to make the prior year amounts comparable to those of the current year.

2. COMPREHENSIVE INCOME

The components of comprehensive income, net of related income taxes, for the three and nine month periods ended September 30, 2005 and 2004, respectively, are as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In 000’s)	2005			2004			2005			2004
Net income	$	1,233		$	12,202		$	13,006		$	19,888
Unrealized gains (losses) on securities		(50	)		(196	)		(169	)		(238	)
Comprehensive income	$	1,183		$	12,006		$	12,837		$	19,650

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3. SEGMENT REPORTING

The Company operates primarily in the television broadcasting and cable advertising businesses. The Company currently owns and operates fifteen television stations, primarily in the Southeast and Midwest. Each of the stations is affiliated with a major network, with eight NBC affiliates, five ABC affiliates, and two CBS affiliates. The Company evaluates segment performance based on income before income taxes, excluding unusual, or non-operating items.

The following table summarizes financial information by segment for the three and nine month periods ended September 30, 2005 and 2004:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In 000’s)	2005			2004			2005			2004
Revenues (net of commissions)
Television station	$	45,346		$	49,915		$	138,606		$	145,653
Cable advertising		3,360			3,668			9,839			10,744
Other		45			23			130			77
Total net revenues	$	48,751		$	53,606		$	148,575		$	156,474
Income (loss) before income taxes
Television station	$	10,620		$	14,358		$	34,291		$	41,523
Cable advertising		451			506			968			1,289
Corporate and other		(7,967	)		(5,891	)		(16,538	)		(21,542	)
Total income before income taxes	$	3,104		$	8,973		$	18,721		$	21,270

There were no material changes in assets by segment from those disclosed in the Company’s 2004 annual report. The goodwill that appears on the face of the balance sheet arose through the acquisition of certain television stations, and therefore has been assigned in its entirety to the Broadcasting segment.

4. EMPLOYEE BENEFITS

The Company has a postretirement plan that provides medical and life insurance benefits for qualified retired employees. The postretirement medical plan is generally contributory with retiree contributions adjusted annually to limit employer contributions to predetermined amounts. The postretirement life plan provides free insurance coverage for retirees and is insured with an unaffiliated company.

Net periodic postretirement benefit cost included the following components:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In 000’s)	2005		2004		2005		2004
Service cost	$	6	$	6	$	20	$	19
Amortization of prior service cost		2		1		6		2
Amortization of actuarial net gain		4		6		9		16
Interest cost		30		33		90		100
Net periodic postretirement benefit cost	$	42	$	46	$	125	$	137

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5. EARNINGS PER SHARE

The calculation of basic and diluted earnings per common share from continuing operations is as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In 000’s except per share data)	2005		2004		2005		2004
Numerator — Earnings:
Net income	$	1,233	$	12,202	$	13,006	$	19,888
Effect of dilutive securities		—		—		—		—
Numerator for basic and diluted earnings per common share	$	1,233	$	12,202	$	13,006	$	19,888
Denominator — Average Shares Outstanding:
Denominator for basic earnings per common share — weighted average shares		17,886		18,314		17,944		18,527
Effect of dilutive securities:
Stock options		82		94		71		134
Denominator for diluted earnings per common share		17,968		18,408		18,015		18,661
Basic earnings per common share	$	0.07	$	0.67	$	0.72	$	1.07
Diluted earnings per common share	$	0.07	$	0.66	$	0.72	$	1.07

The diluted earnings per common share calculation excludes the effect of potentially dilutive shares when the inclusion of those shares in the calculation would have an anti-dilutive effect. For the three-month periods ended September 30, 2005 and 2004, the Company had approximately 51,000 and 28,000 weighted average options and approximately 292,000 and 371,000 weighted average restricted shares, respectively, which were not included in the diluted earnings per common share calculation as their effect was anti-dilutive. For the nine-month periods ended September 30, 2005 and 2004, the Company had approximately 112,000 and 28,000 weighted average options and 123,000 and 98,000 weighted average restricted shares, respectively, which were not included in the diluted earnings per common share calculation as their effect was anti-dilutive.

6. EQUITY COMPENSATION

In accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation”, the Company has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”) and related interpretations in accounting for its equity compensation plans and does not recognize compensation expense for its stock-based compensation plans other than for awards of restricted             shares. Expense is recognized over the vesting period of the restricted shares.

Under APB No. 25, because the exercise price of the Company’s employee stock options at least equals the market price of the underlying stock on the date of the grant, no compensation expense is

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recognized. Pro forma information regarding net income and earnings per share is required by SFAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the Black-Scholes fair value method described in that statement.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. The Company’s employee stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimate.

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting periods. The Company’s pro forma information is as follows:

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
(In 000’s, except per share amounts)	2005			2004			2005			2004
Stock-based compensation cost included in net income (net of taxes)	$	859		$	760		$	2,497		$	1,501
Net income:
As reported	$	1,233		$	12,202		$	13,006		$	19,888
Pro forma compensation expense (net of taxes)		(197	)		(203	)		(588	)		(605	)
Pro forma net income	$	1,036		$	11,999		$	12,418		$	19,283
Basic earnings per share:
As reported	$	0.07		$	0.67		$	0.72		$	1.07
Pro forma		0.06			0.66			0.69			1.04
Diluted earnings per share:
As reported	$	0.07		$	0.66		$	0.72		$	1.07
Pro forma		0.06			0.65			0.69			1.03

7. COMMON STOCK

The following table summarizes the Common Stock activity from the date of the Company’s most recently audited annual financial statements to the end of the period covered by this report:

	Common
	Shares			Common
(In 000’s)	Outstanding			Stock
Balance as of December 31, 2004		18,469		$	49,273
Stock issued for employee benefit and performance incentive compensation programs		147			5,566
Income tax benefit resulting from employee exercise of options					768
Stock repurchased		(314	)		(12,971	)
Balance as of September 30, 2005		18,302		$	42,636

During the first quarter of 2005, the Company funded the accrued 2004 discretionary contribution to its employee retirement and savings plan. Half of this funding, approximately $1.7 million, was in the form of approximately 40,000 shares of Liberty common stock.

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8. CREDIT FACILITY

In March 2001, the Company entered into a $100 million unsecured 364-day revolving credit facility with a bank. The Company renewed the facility on substantially similar terms in each of the years 2002, 2003, 2004, and during the first quarter of 2005. At the end of the term of the facility, any outstanding principal and interest will come due, unless the bank, in its sole discretion, otherwise extends the facility. The facility provides that the funds drawn may be used for working capital, dividends, and other general corporate purposes, capital expenditures, purchases of common stock, acquisitions, and investments. The Company had $100 million and $20 million of debt outstanding at September 30, 2005 and December 31, 2004, respectively. As of September 30, 2005 the weighted average interest rate on outstanding borrowings was 4.50%.

The revolving credit facility has both an interest coverage and a leverage coverage covenant. These covenants, which involve debt levels, interest expense, EBIT, and EBITDA (measures of cash earnings defined in the revolving credit agreement), can affect the interest rate on current and future borrowings. The Company has remained in compliance with all covenants throughout the period covered by this report.

During the first quarter of 2005, the Company amended the credit agreement to, among other things, extend the term of the facility through May 17, 2006 and increase the aggregate facility commitment from $100 million to $150 million. The amended credit facility restricts payments for dividends and purchases of common stock to no more than $180 million during the period January 1, 2005 through December 31, 2005, and for periods after January 1, 2006 to $100 million plus fifty percent of cumulative net income of the Company for all fiscal periods beginning January 1, 2005. As the maturity date of the credit facility, May 17, 2006, is within one year of the current balance sheet date, the Company has included it within the caption “Current liabilities” on the face of the balance sheet.

The Company classified the credit facility outside of the caption “Current liabilities” in its June 30, 2005 balance sheet. On that balance sheet the Company reported current liabilities of approximately $21.2 million. As the maturity date of the credit facility was within one year of that balance sheet date, the credit facility should have been classified within the caption “Current liabilities” and the total for that caption should have been $131.2 million. This change in presentation does not impact the Company’s compliance with its debt covenants.

9. CHANGE IN ESTIMATE

During the third quarter of 2005, the Company re-evaluated its medical “incurred but not reported” (“IBNR”) expense accrual. Based on information provided by the Company’s claims paying agent, it was determined that the lag-time between when a claim is incurred and when it is paid has decreased from the historical levels previously used by the Company in its IBNR accrual calculation. This decrease in lag-time resulted in a reduction in the accrual required at September 30, 2005. The effect of this change in estimate increased income for the quarter and year to date periods approximately $300,000. The effect on both basic and diluted earnings per share for the quarter and year-to-date periods was approximately $0.02 per share.

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10. HURRICANE COSTS

During the third quarter of 2005 Liberty’s television station in Biloxi, MS, was impacted by hurricane Katrina. The hurricane damaged the main station building and certain other equipment. The Company believes that it is fully insured for all property damage resulting from Katrina. In addition, also during the third quarter of 2005, hurricane Rita impacted the Company’s television station in Lake Charles, LA, to a much lesser extent. The Company has accrued the applicable deductibles related to theses hurricanes as of September 30, 2005. The deductibles for both stations, and other hurricane related expenses not expected to be recovered under the Company’s insurance policies, total approximately $740,000 and are included in operating expenses. The Company does not anticipate significant additional expenses related to these hurricanes in future periods.

11. PROVISION FOR INCOME TAXES

It is the Company’s policy to establish reserves for income taxes that may become payable in future years as a result of an examination by tax authorities. The Company establishes the reserves based upon management’s assessment of exposures related to the recognition of revenue or the deductions in its tax returns. The reserves are analyzed periodically, and adjustments are made as events occur to warrant adjustment to the reserve. For example, if the statutory period for assessing tax on a given tax return or period lapses, the reserve associated with that period may be adjusted. In addition, the adjustment to the reserve may reflect additional exposure based on current calculations. To the extent the Company were to prevail in matters for which accruals have been established, statutory periods for assessing taxes lapse, or it be required to pay amounts in excess of reserves, the Company’s effective tax rate in a given financial statement period could be materially affected.

During the second quarter of 2005, as a result of a favorable settlement of an IRS matter, management reversed approximately $1.9 million of valuation allowances associated with a receivable related to the refund of income taxes previously paid. Also, a receivable of approximately $0.8 million was recorded resulting from an unrelated refund associated with a closed examination period.

12. COMMITMENTS AND CONTINGENCIES

In November of 2000, the Company sold its insurance operations to a third party. Under the purchase agreement, subject to certain limitations, the Company agreed to indemnify the buyer for damages (as defined in the purchase agreement) relating to certain tax matters, pre-existing litigation and regulatory proceedings. The indemnification relating to the tax matters is in effect until the expiration of the relevant statutes of limitation. The indemnifications relating to the other matters are in effect until the final resolution of such matters. The Company believes that the likelihood of it being required to make payments as a result of these indemnifications is remote, and therefore has no liability recorded related to these indemnifications. The limit of amounts recoverable by the acquirer will not exceed one-half the purchase price, or approximately $324 million.

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13. NEW ACCOUNTING PRONOUNCEMENTS

On December 16, 2004, the Financial Accounting Standards Board issued Statement No. 123 (Revised 2004), Share-Based Payment (“Statement No. 123(R)”), which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. On April 14, 2005 the Securities and Exchange Commission announced the adoption of a rule that amends the compliance dates for Statement 123(R). The new rule allows companies to implement Statement 123 (R) at the beginning of their next fiscal year that begins after June 15, 2005, which for the Company is the first quarter of 2006. Early adoption is permitted.

Generally, the approach in Statement 123(R) is similar to the approach described in Statement 123. However, Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.

Statement 123(R) permits public companies to adopt its requirements using one of two methods:

1.	A “modified prospective” method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of Statement 123(R) for all share-based payments granted after the effective date and (b) based on the requirements of Statement 123 for all awards granted to employees prior to the effective date of Statement 123(R) that remain unvested on the effective date.
2.	A “modified retrospective” method which includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under Statement 123 for purposes of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption.

The Company plans to adopt Statement 123(R) using the modified prospective method.

As permitted by Statement 123, the Company currently accounts for share-based payments to employees using APB Opinion 25’s intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options. The Company has not granted stock options to its employees since June of 2002. While authorized under its incentive compensation program to grant stock options, at this time the Company does not intend to make future stock option grants. Therefore, the Company anticipates that the effect of Statement 123(R) will be limited to expensing the remaining value of it’s previously granted but unvested options. The Company believes that it will adopt 123(R) in the first quarter of 2006, and the estimated effect of Statement 123(R) on net income will be approximately $230,000, and $20,000 in the years 2006 and 2007 respectively.

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14. AGREEMENT AND PLAN OF MERGER

On August 25, 2005, Liberty and Raycom Media, Inc., (“Raycom”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, (i) a wholly owned subsidiary of Raycom will merge with and into Liberty, with Liberty as the surviving corporation, and (ii) each share of Liberty common stock that is outstanding at the effective time of the merger will be converted into the right to receive $47.35 in cash (the “Merger Consideration”). Following the merger, Liberty will be a wholly owned subsidiary of Raycom. Each outstanding share of restricted stock granted under Liberty’s Incentive Compensation Program will become fully vested and converted into the right to receive the Merger Consideration, and each outstanding option to purchase Liberty’s common stock will be converted into the right to receive a cash amount equal to the Merger Consideration less the exercise price for such option.

The closing of the merger is subject to the approval of Liberty’s shareholders, the approval of the Federal Communications Commission and other closing conditions. Liberty shareholders owning approximately 20% of Liberty’s outstanding shares have agreed to vote in favor of the merger.

Corporate, general, and administrative expenses include approximately $2.5 million of costs associated with the proposed acquisition of Liberty by Raycom.

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PART I, ITEM 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Unaudited)

The Liberty Corporation is a holding company with operations primarily in the television broadcasting industry. The Company’s television broadcasting subsidiary, Cosmos Broadcasting, consists of fifteen network-affiliated stations located in the Southeast and Midwest, along with other ancillary businesses. Eight of the Company’s television stations are affiliated with NBC, five with ABC, and two with CBS.

On August 25, 2005, Liberty and Raycom Media, Inc., (“Raycom”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, (i) a wholly owned subsidiary of Raycom will merge with and into Liberty, with Liberty as the surviving corporation, and (ii) each share of Liberty common stock that is outstanding at the effective time of the merger will be converted into the right to receive $47.35 in cash (the “Merger Consideration”). Following the merger, Liberty will be a wholly owned subsidiary of Raycom. Each outstanding share of restricted stock granted under Liberty’s Incentive Compensation Program will become fully vested and converted into the right to receive the Merger Consideration, and each outstanding option to purchase Liberty’s common stock will be converted into the right to receive a cash amount equal to the Merger Consideration less the exercise price for such option.

The closing of the merger is subject to the approval of Liberty’s shareholders, the approval of the Federal Communications Commission and other closing conditions. Liberty shareholders owning approximately 20% of Liberty’s outstanding shares have agreed to vote in favor of the merger.

SEASONALITY OF TELEVISION REVENUES

The Company’s revenues are usually subject to seasonal fluctuations. The advertising revenues of the stations are generally highest in the second and fourth quarters of each year, due in part to increases in consumer advertising in the spring and retail advertising in the period leading up to and including the holiday season. Additionally, advertising revenues in even-numbered years tend to be higher as they benefit from advertising placed by candidates for political offices and demand for advertising time in Olympic broadcasts.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2005 Compared to Three Months Ended September 30, 2004

Total net revenue decreased $4.9 million on a year-over-year basis. Station net revenue decreased $4.6 million for the same period. Cable and other net revenue decreased $0.3 million as compared to the prior year quarter. Net revenue decreased on a year-over-year basis due mainly to lower levels of political revenue. The year 2005 is an off-cycle election year, and as such, is expected to have lower levels of political revenue when compared to 2004 which was a presidential election year.

Local revenue was down $1.0 million due to softness in the automotive, entertainment, and supermarket/drug store categories. National revenue was down $0.2 million, on a year-over-year basis as softness in the automobile and retail store categories was partially offset by increases in the restaurant and

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retail telemarketing categories. Political revenue for the third quarter of 2005 was $0.3 million as compared to $5.3 million in the third quarter of 2004. This is consistent with the Company’s historical experience that advertising revenues in even-numbered years tend to be higher than in odd-numbered years due to advertising placed by or on behalf of candidates running for political offices. The Company expects the cyclicality of political advertising revenues to continue to affect its revenues in future periods. The Company does not, however, know whether the variability in spending by the entities comprising the other categories tracked by the Company will continue at similar rates in future periods.

During the third quarter of 2005 Liberty’s television station in Biloxi, MS, was impacted by hurricane Katrina. The hurricane damaged the main station building and certain other equipment. The Company believes that it is fully insured for all property damage resulting from Katrina. In addition, also during the third quarter of 2005, hurricane Rita impacted the Company’s television station in Lake Charles, LA, to a much lesser extent. The Company has accrued the applicable deductibles related to theses hurricanes as of September 30, 2005. The deductibles for both stations, and other hurricane related expenses not expected to be recovered under the Company’s insurance policies, total approximately $740,000 and are included in operating expenses. The Company does not anticipate significant additional expenses related to these hurricanes in future periods.

Excluding the hurricane related expenses, operating expenses (including amortization of program rights) decreased $1.5 million quarter-over-quarter, due mainly to lower medical insurance and travel expenses. During the third quarter of 2005, the Company re-evaluated its medical “incurred but not reported” (“IBNR”) expense accrual. Based on information provided by the Company’s claims paying agent, it was determined that the lag-time between when a claim is incurred and when it is paid has decreased from the historical levels previously used by the Company in its IBNR accrual calculation. This decrease in lag-time resulted in a reduction in the accrual required at September 30, 2005. Travel expenses were lower in 2005 due to the prior year having included sales incentive trips for clients to the Olympics, with no such expenses during the current quarter.

Corporate expenses were $6.4 million in the third quarter of 2005, an increase of $1.2 million as compared to the $6.2 million reported for the third quarter of 2004. The increase in corporate expenses is due mainly to transaction costs associated with the Company’s proposed acquisition by Raycom, partially offset by lower levels of accrued bonus expense.

Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004

Total net revenue decreased $7.9 million on a year-over-year basis. Station net revenue decreased $7.0 million for the same period. Cable and other net revenue decreased $0.9 million as compared to the prior year. Net revenue decreased on a year-over-year basis due mainly to lower levels of political revenue. The year 2005 is an off-cycle election year, and as such, is expected to have lower levels of political revenue when compared to 2004 which was a presidential election year.

Local revenue increased $1.1 million as softness in the automotive and restaurant categories was offset by increases in the professional services, medical, and retail telemarketing categories. National revenue was down $1.7 million, on a year-over-year basis due mainly to softness in the automotive and telecommunications categories being partially offset by an increase in the retail telemarketing category. Political revenue for the first nine months of 2005 was $1.2 million as compared to $11.8 million in the first nine months of 2004. This is consistent with the Company’s historical experience that advertising revenues in even-numbered years tend to be higher than in odd-numbered years due to advertising placed by or on behalf of candidates running for political offices. The Company expects the cyclicality of political advertising revenues to continue to affect its revenues in future periods. The Company does not,

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however, know whether the variability in spending by the entities comprising the other categories tracked by the Company will continue at similar rates in future periods.

Exclusive of the additional costs related to the hurricanes, as discussed above, operating expenses (including amortization of program rights) decreased $1.2 million on a year-over-year basis. Increases related to planned annual increases in employee compensation and amortization expense related to restricted stock grants made during 2004 were offset by lower levels of medical insurance and travel expenses, as noted above, in addition to lower levels of accrued bonus expense. The Company would expect continued increases in employee compensation related to annual increases in base pay, while lower levels of bonus expense will be dependant upon the future overall performance of the Company for the remainder of 2005.

Corporate expenses were $15.4 million for the first nine months of 2005, an increase of $1.0 million as compared to the $14.4 million reported for the first nine months of 2004. The increase in corporate expenses is due mainly to planned annual increases in employee compensation, increased amortization expense related to restricted stock grants, and transaction costs related to the Company’s proposed acquisition by Raycom being partially offset by the absence of the $1.6 million charge in 2004 related to the settlement of all outstanding issues associated with the terminated GNS Media transaction. During 2003, the Company announced that it was in negotiations with GNS for the purpose of entering into certain agreements associated with GNS’s proposed purchase of a television station. Those negotiations were subsequently terminated.

Net investment income was $2.0 million for the first nine months of 2005, as a result of gains from the sale of investments in, and distributions from, the Company’s venture capital portfolio, coupled with interest income earned on cash balances, partially offset by impairments taken in the Company’s venture capital portfolio. Net investment income for the first nine months of 2004 was a loss of $5.4 million. Interest earned on cash balances and notes receivable, and a $0.7 million gain on sale of an investment in the Company’s venture capital portfolio were offset by $1.1 million of impairments taken during the first quarter of 2004 and a $5.3 million impairment of one of the Company’s strategic investments taken during the second quarter of 2004.

During the second quarter of 2005, as a result of a favorable settlement of an IRS matter, management reversed approximately $1.9 million of valuation allowances associated with a receivable related to the refund of income taxes previously paid. Also, a receivable of approximately $0.8 million was recorded resulting from an unrelated refund associated with a closed examination period. The Company’s tax rate, exclusive of the issues noted above, is expected to be approximately 46.7% for 2005.

Capital, Financing and Liquidity

At September 30, 2005, the Company had cash of approximately $20.0 million, outstanding debt of $100.0 million, and $50.0 million available under its credit facility. During the first quarter of 2005, the Company declared a special dividend of $4.00 per share, approximately $73.5 million, in addition to its normal recurring quarterly dividend of $0.25 per share. The special dividend was paid during the second quarter of 2005 using a significant portion of the Company’s then available cash balance. The Company borrowed $80.0 million under its credit facility to assist in funding the special and regular dividends.

The revolving credit facility has both an interest coverage and a leverage coverage covenant. These covenants, which involve debt levels, interest expense, EBIT, and EBITDA (measures of cash earnings defined in the revolving credit agreement), can affect the interest rate on current and future borrowings. The Company was in compliance with all covenants throughout the period covered by this report.

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During the first quarter of 2005, the Company amended the credit facility to, among other things, extend the term of the facility through May 17, 2006 and increase the aggregate facility commitment from $100 million to $150 million. The amended credit facility restricts payments for dividends and purchases of common stock to no more than $180 million during the period January 1, 2005 through December 31, 2005, and for periods after January 1, 2006 to $100 million plus fifty percent of cumulative net income of the Company for all fiscal periods beginning January 1, 2005.

The Company has refinanced its revolving credit facility on similar terms in each of the last five years, and based upon the cash flow of its operations, believes that it will continue to be able to due so into the foreseeable future. The Company anticipates that its primary sources of cash, those being current cash balances, operating cash flow, and the available credit facility will be sufficient to finance the Company’s operating requirements and anticipated capital expenditures, for both the next 12 months and the foreseeable future thereafter.

Cash Flows

The Company’s net cash provided by operating activities was $31.9 million for the first nine months of 2005 compared to $41.2 million for the same period of the prior year. The Company’s net cash used in investing activities was $8.7 million for the first nine months of 2005, as compared to net cash provided of $2.5 million for the same period of 2004. The decrease in net cash provided by investing activities is attributable to the cash realized on the sale of an investment in the Company’s strategic portfolio during 2004 that was not present during 2005. Net cash used in financing activities for the first nine months of 2005 was $19.5 million compared to $68.2 million for the first nine months of 2004. During 2005, the Company had net borrowings of $80.0 million under its credit facility, compared to $50.0 million during 2004. As noted above, the Company drew down the funds to assist in the funding of the 2005 special dividend.

Forward Looking Information

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain information contained herein or in any other written or oral statements made by, or on behalf of Liberty, is or may be viewed as forward-looking. The words “expect,” “believe,” “anticipate” or similar expressions identify forward-looking statements. Although Liberty has used appropriate care in developing any such forward-looking information, forward-looking information involves risks and uncertainties that could significantly impact actual results. These risks and uncertainties include, but are not limited to, the following: the failure to obtain Liberty shareholder approval of the merger or the failure to obtain regulatory approvals or satisfy the other conditions to the merger; the termination of the merger agreement prior to the closing; the merger may not close in the expected timeframe; changes in national and local markets for television advertising; changes in general economic conditions, including the performance of financial markets and interest rates; competitive, regulatory, or tax changes that affect the cost of or demand for Liberty’s products; and adverse litigation results. Liberty undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise.

Additional Information and Where to Find It

In connection with the proposed merger, Liberty filed a definitive proxy statement with the U.S. Securities and Exchange Commission (SEC) on October 31, 2005 which was subsequently distributed to Liberty’s shareholders for purposes of the shareholder meeting scheduled for December 6,2005. INVESTORS ARE ADVISED TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Investors may obtain a free copy of the proxy

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statement and other documents filed by Liberty with the SEC at the SEC’s web site at http://www.sec.gov. Free copies of the proxy statement and Liberty’s other filings with the SEC may also be obtained from Liberty. Free copies of Liberty’s filings may be obtained by directing a request to The Liberty Corporation, 135 South Main Street. Greenville, South Carolina 29601.

Participants in the Solicitation

Liberty, Raycom and their respective directors, executive officers and other members of their management and employees may be deemed to be soliciting proxies from Liberty’s shareholders in favor of the merger. Information concerning persons who may be considered participants in the solicitation of Liberty’s shareholders under the rules of the SEC is set forth in the proxy statement filed by Liberty with the SEC on March 28, 2005 and October 31, 2005.

PART I, ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the information, as disclosed in Part II, Item 7A of the Company’s most recent annual report on Form 10-K, that would be provided under Item 305 of Regulation S-K from the end of the preceding fiscal year to the date of this report.

PART I, ITEM 4

CONTROLS AND PROCEDURES

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and are also effective to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is accumulated and communicated to the Company’s management, including the principal executive and principal financial officers, to allow timely decisions regarding required disclosure.

During the most recent fiscal quarter, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

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PART II, ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

	Total				Total Number of		Maximum Number
	Number of				Shares (or Units)		of Shares that May
	Shares (or		Average Price		Purchased as Part of		Yet Be Purchased
	Units)		Paid per Share		Publicly Announced		Under the Plans or
Period	Purchased		(or Unit)		Plans or Programs		Programs
July 1—31, 2005		2,844	$	36.77		—		3,698,500
August 1—31, 2005		—	$	—		—		3,698,500
September 1—30, 2005		—	$	—		—		3,698,500
Total		2,844	$	36.77		—		3,698,500

During the quarter the Company acquired 2,844 shares as satisfaction of withholding tax obligations for restricted stock that vested during the period, in accordance with provisions of the Company’s Performance Incentive Compensation plan.

On February 8, 2005 Liberty’s Board of Directors extended to February 28, 2006 the Company’s authorization to purchase from time to time up to 4,000,000 shares of stock in the open market or directly negotiated transactions.

PART II, ITEM 6.
EXHIBITS

INDEX TO EXHIBITS

EXHIBIT 10	THE PERFORMANCE INCENTIVE COMPENSATION PROGRAM (Amended and Restated — November 2000)
EXHIBIT 11	Consolidated Earnings Per Share Computation (included in Note 5 of Notes to Consolidated and Condensed Financial Statements)
EXHIBIT 31	Rule 13a-14(a)/15d-14(a) Certifications
EXHIBIT 32	Section 1350 Certifications

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

THE LIBERTY CORPORATION (Registrant)	Date: November 1, 2005
/s/ Howard L. Schrott
Howard L. Schrott
Chief Financial Officer
/s/ Martha G. Williams Martha G. Williams
Vice President and General Counsel

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EX-10

EXHIBIT 10

THE PERFORMANCE
INCENTIVE COMPENSATION PROGRAM
(Amended and Restated — November 2000)

     The following is the text of the Performance Incentive Compensation Program (the “Program”):

     Section 1. Purpose. The purpose of this Program is to provide The Liberty Corporation (the “Company”) and its subsidiaries with an effective means of attracting, retaining and motivating officers, other key employees and directors (whether or not they are employees) and to encourage and enable them to acquire common stock of the Company (“Common Stock”), thereby increasing their proprietary interest in the Company’s success. Subject to the limitations set forth below, the Program provides for the granting of incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), nonstatutory stock options, performance units, restricted share awards, unrestricted share awards, phantom stock units, and all or any combination of the foregoing (“Awards”), to eligible employees.

     Section 2. Administration. The Compensation Committee of the Board of Directors or such other committee of the Board as the Board may subsequently designate (hereinafter referred to as the “Committee”) shall have full discretionary power and authority, subject to such orders or resolutions not inconsistent with the provisions of the Program as may from time to time be issued or adopted by the Board, to interpret the provisions and supervise the administration of the Program. All determinations by the Committee shall be made by the affirmative vote of a majority of its members, but any determination reduced to writing and signed by all of the members shall be fully as effective as if it has been made by a majority vote at a meeting duly called and held. All decisions made by the Committee pursuant to the provisions of the Program or resolutions of the Board shall be conclusive and binding on all persons, including the Company, its shareholders and employees, and participants in the Program.

     Section 3. Shares Subject to the Program.

     (A) Shares of Common Stock are the only shares that may be delivered under the Program. The shares of Common Stock to be delivered under the Program shall be made available from the authorized but unissued shares or from shares reacquired by the Company, including shares purchased in the open market.

     (B) Subject, in each case, to adjustments made pursuant to the provisions of Sections 3(C) and 3(D):

     (i) The aggregate number of shares that may be subject to Awards under the Program from its initial inception in 1983 shall not exceed 5,000,000 shares.

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     (ii) Effective May 6, 1997, with respect to stock options granted on or after that date (and any stock options granted prior to such date if their grant was conditioned upon approval of amendments to the Program by the shareholders at their annual meeting on May 6, 1997), the number of shares of Common Stock with respect to which such stock options may be granted to any one participant within any calendar year shall not exceed 400,000 shares.

     (iii) Effective May 6, 1997, with respect to Awards granted on or after that date (and any Awards granted prior to such date if their grant was conditioned upon approval of amendments to the Program by the shareholders at their annual meeting on May 6, 1997), the number of shares of Common Stock with respect to which any such Awards that are measured based on a number of actual or phantom shares (except for stock options governed by paragraph (ii) above) may be granted to any one participant within any calendar year shall not exceed 100,000 shares.

     (iv) Effective May 6, 1997, with respect to Awards granted on or after that date (and any Awards granted prior to such date if their grant was conditioned upon approval of amendments to the Program by the shareholders at their annual meeting on May 6, 1997), the maximum amount of compensation that can be paid to any one participant during any calendar year on account of any such Awards that are not measured based on a number of actual or phantom shares of Common Stock shall not exceed $2,000,000.

     (v) Effective May 6, 1997, with respect to Awards granted on and after that date (and any Awards granted prior to such date if their grant was conditioned upon approval of amendments to the Program by the shareholders at their annual meeting on May 6, 1997), under all such Awards (other than stock options) granted under the Program, in any one calendar year: (x) no one participant may be paid cash in excess of $5,000,000 and (y) no one participant may receive more than 1,000,000 shares of Common Stock. For purposes of this paragraph, the amount paid or received in any calendar year under an Award described in this paragraph shall be deemed to be the value or number of shares earned under such Award based on the attainment of performance objectives, if any, and based on any downward adjustments, as determined by the Committee, as of the date of the determination. Except in the case of any prior Awards granted subject to approval by the shareholders of amendments to the Program at their May 6, 1997 annual meeting, amounts paid pursuant to Awards granted under the Program prior to May 6, 1997, shall not be counted toward and shall not be subject to the limits contained in this paragraph (v).

     (C) The following rules shall apply in determining the amount of shares or cash that has been used for purposes of the limits in Section 3(B)(i), (ii), (iii), (iv) and (v):

     (i) Any shares affected by the expiration or termination (without exercise) of any option (or portion thereof) prior to May 6, 1997 or by the forfeiture of all or any portion of an Award of restricted shares or phantom stock units prior to May 6, 1997, shall be restored to the total shares available for use under the Program for Awards to the same participant or other participants.

     (ii) Effective May 6, 1997, if: (a) any shares of Common Stock subject to an Award are forfeited or cancelled; or (b) if any Award otherwise relating to shares of Common Stock terminates by expiration, forfeiture, cancellation or otherwise without the issuance of such shares or is settled in cash in lieu of Common Stock; or (c) if any shares of Common Stock subject to an Award, or any Awards otherwise relating to shares of Common Stock, are, with the Committee’s permission, exchanged for or otherwise surrendered and cancelled in connection with the grant of other Awards, the shares of Common Stock so affected (directly or as a measurement of the Award, to the extent so affected) shall be restored to the total shares available for use under the Program for Awards generally, but shall be counted against the limitations contained in Section 3(B)(ii), (iii) and (v) with respect to the participant involved. Although shares subject to or

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relating to an Award exchanged for or otherwise surrendered and cancelled in connection with the grant of a new Award shall be restored to the total shares available for use under the Program, the shares subject to or relating to the resulting new Award shall be counted for all purposes under the Program. The maximum number of shares available for issuance under the Program shall not be reduced to reflect any distributions that may be reinvested in additional shares of Common Stock.

     (D) In the event of a merger, reorganization, consolidation, recapitalization, stock dividend, spin-off, stock split or any other change in corporate structure or other distribution of stock or property (except for ordinary cash dividends) affecting the Company’s Common Stock, such adjustments shall be made in the aggregate number of shares subject to the Program, the maximum number of shares which may be acquired by, or subject to an Award granted or paid to, any participant under the Program, the number and option price of shares subject to then outstanding options granted under the Program, the number of restricted shares then subject to restrictions under the Program and the number of shares used to determine the value of then outstanding phantom stock units as may be determined to be appropriate by the Committee. In no event shall any “Qualifying Award” (as described in Section 10) that is then held by a “Covered Employee” as defined in Section 162(m) of the Code be adjusted pursuant to Section 3(D) to the extent it would cause such Award to fail to qualify as “Performance-Based Compensation” under Section 162(m) of the Code.

     Section 4. Eligibility for Participation. The individuals eligible to participate in the Program shall consist of officers, other key employees and directors of the Company and its subsidiaries, whether or not such directors are also employees of the Company or its subsidiaries, as determined by the Committee. Subject to the limitations of the Program, the Committee shall, after consultation with and consideration of the recommendations of management, select the officers, employees and directors to so participate and determine whether an officer, employee or director is to receive Awards hereunder; provided, however, that no incentive stock option may be granted to any director who is not an employee of the Company (or any of its subsidiaries). The Committee, in its discretion, may impose any conditions that it deems desirable on the grant of any new Award, including without limitation a condition requiring the applicable participant to surrender for cancellation an outstanding Award in order to obtain a new Award that the Committee desires to grant in substitution of any such outstanding Award.

     Section 5. Stock Options.

     (A) Stock options shall be granted to participants by the Committee from time to time at its discretion. Each option shall be evidenced by a written option agreement which shall contain such terms and conditions as may be approved by the Committee and shall be signed by an officer of the Company and the participant. Incentive stock options and nonstatutory stock options shall be evidenced by separate and distinct option agreements.

     (B) A participant shall not be granted any incentive stock option if the receipt of that option would result in the participant owning incentive stock options (under the Program and any other plan maintained by the Company or any subsidiary) that become exercisable for the first time in any one calendar year into stock of the Company or any of its subsidiaries with a fair market value in excess of $100,000. For purposes of the preceding sentence, the fair market value of the stock of the Company or any of its subsidiaries will be determined by the Committee as of the grant of the incentive stock options without regard to any restriction other than a restriction which by its terms will never lapse.

     (C) The price at which shares may be purchased upon exercise of a particular option shall be not less than 100% of the fair market value of such shares on the date such option is granted, as determined by the Committee without regard to any restriction other than a restriction which by its terms will never lapse. In the case of an individual who, at the time an option is granted, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (or any of its subsidiaries) (a “10% Shareholder”), the exercise price of any incentive stock option shall be not less than 110% of the fair market value of the shares subject to the option on the date such option is granted, as determined by the Committee without regard to any restriction other than a restriction which by its terms will never lapse.

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     (D) Options may be granted for any period of time as established by the Committee, except that:

     (i) The term of any incentive stock option shall not be longer than ten years (or five years if granted to a 10% Shareholder) from the date the option is granted.

     (ii) No option granted prior to 1997 may be exercised before the expiration of a one year period of continued employment by the optionee with the Company or a subsidiary thereof commencing on the date the option is granted, except as provided in Section 5(E)(iv) below or except as provided in any amendment to the applicable option agreement approved and authorized through specific action by the Committee in a manner consistent with terms permitted hereunder for options granted after 1996.

     (E) Subject to the limitations in this Section 5 and the terms and conditions of the option agreement, each option shall be exercisable at such time or times and in such amount or amounts as the Committee may prescribe and specify in the applicable option agreement.

     (i) No incentive stock option granted after 1996 under this Program may be exercised more than three months (or one year in the case of a disabled employee or a deceased employee who died within three months of terminating employment or during a disability that terminated employment) after the participant holding such option ceased being an employee of the Company or a subsidiary thereof, unless: (x) a longer period applies under Section 5(E)(iv) below for the beneficiary or legal representative of a deceased employee whose death terminated employment, or (y) the Company and such participant (or a deceased participant’s beneficiary or legal representative) mutually agree in writing that such option will be amended to treat it as a nonstatutory stock option.

     (ii) Unless the option agreement specifies a longer or shorter time for exercise, a nonstatutory stock option granted after 1996 must be exercised no later than one year after the participant holding such option ceases to be an employee (or ceases to be a non-employee director) of the Company or a subsidiary thereof, unless a longer period applies under Section 5(E)(iv) below.

     (iii) In the case of options granted prior to 1997 (both incentive stock options and nonstatutory stock options), unless the option agreement is amended by specific action by the Committee (with the consent of the holder if required) in a manner consistent with terms permitted hereunder for options granted after 1996, each such option may be exercised only during the continuance of the optionee’s employment with the Company or one of its subsidiaries, except as provided in Section 5(E)(iv) below.

     (iv) Except as otherwise provided in Section 5(E)(i) with respect to the disability or retirement of the holder of incentive stock options granted after 1996, in the event of termination of employment (or service as a non-employee director) by an optionee by reason of death, disability or retirement at normal retirement age under the Company’s Retirement Plan or any applicable Retirement Plan of any of the Company’s subsidiaries (or any applicable retirement policy for non-employee directors), the written Award agreement may provide that the options then held by the optionee shall become fully exercisable and/or that any options then exercisable by such optionee shall remain exercisable by the optionee or, if applicable, a beneficiary or legal representative, for up to three years from the date of such termination of employment (or service as a non-employee director) as specified in the option agreement or until the expiration of the option, whichever occurs first.

     (F) No shares shall be delivered pursuant to the exercise of any option, in whole or in part,

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until qualified for delivery under such laws and regulations as may be deemed by the Committee to be applicable thereto and until payment in full of the option price therefor is received by the Company. Payment of the purchase price shall be made in cash, cash equivalent or, at the discretion of the Committee, in Common Stock of the Company valued at its fair market value on the date of exercise or, at the discretion of the Committee, in a combination of the foregoing.

     (G) An option granted under the Program may not be transferred except by will or the laws of descent and distribution and, during the lifetime of the participant to whom granted, may be exercised only by such participant or his or her personal representative.

     Section 6. Performance Units.

     (A) Performance units may be awarded by the Committee to participants from time to time at its discretion. Such units shall have defined terms and conditions as to their value and the basis on which such values will be determined.

     (B) Performance units may be awarded in lieu of, or in combination with, any other Awards, as the Committee may determine. Performance standards shall be established by the Committee each time performance units are granted and, except as provided in Section 6(D) below, these standards must be met during the continuance of the participant’s employment with (or service as a non-employee director of) the Company or one of its subsidiaries and prior to the making of any payment with respect to such units.

     (C) Performance units shall be assigned a value by the Committee upon the award of such units.

     (D) The value of performance units as established pursuant to Section 6(C) above shall be paid in cash promptly after the performance standards established pursuant to Section 6(B) above shall have been met and, for Qualifying Awards, the Committee certification required under Section 10 shall have occurred. In the event of termination of employment (or service as a non-employee director) by reason of death, disability or retirement at normal retirement age under the Company’s Retirement Plan or any applicable Retirement Plan of any of the Company’s subsidiaries (or any applicable retirement policy for non-employee directors), the Committee shall have complete discretion to waive all or a part of the continued employment or service requirements and performance standard requirements for payment in respect of one or more performance units that are not Qualifying Awards (as defined below).

     (E) Performance units awarded under the Program may not be transferred except by will or the laws of descent and distribution and, during the lifetime of the participant to whom awarded, payment may be made with respect to such performance units only to the participant or such participant’s personal representative.

     Section 7. Restricted Shares.

     (A) Awards of restricted shares of Common Stock of the Company shall be granted to participants by the Committee from time to time in its discretion. Upon the grant of such an Award to a participant, the Committee shall notify the participant in writing of the terms of such Award, as described below. Each Award of restricted shares shall be evidenced by an agreement which shall contain such terms and conditions as may be approved by the Committee and which are consistent with the applicable provisions of the Program and shall be signed by an officer of the Company and the participant.

     (B) No consideration will be paid by a participant pursuant to an Award of restricted shares under the Program.

     (C) Except as provided for in Section 7(D) and Section 7(F) below, restricted shares awarded to a participant under the Program shall vest in the participant during a period commencing on the date

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such shares are awarded to a participant and ending on a date to be specified by the Committee, in accordance with a vesting schedule to be determined by the Committee in its discretion and specified in the Award. Subject to the immediately preceding sentence, the Committee may condition the vesting of any restricted shares awarded after November 7, 1995 on any additional terms and conditions (including performance achievement goals applicable to all or any portion of the overall vesting period) for such period or periods as shall be determined by the Committee. If the Award document relating to any Award of restricted shares granted prior to November 7, 1995 fails to contain any vesting schedule, then such shares shall vest in equal annual installments (of 20% on each anniversary of the Award date) over the five year period commencing on the date such shares are awarded.

     (i) To the extent that the shares remain non-vested under the vesting schedule and any additional vesting terms and conditions set by the Committee, such shares shall be deemed to be subject to a Restriction Period. The Restriction Period for restricted shares shall terminate when and to the extent that such shares vest in the participant in accordance with their stated vesting terms or in accordance with the accelerated vesting provided in Section 7(D), Section 7(F) or the terms of any Award implementing the provisions of Section 12 below, subject, in each case, to the need for Qualifying Awards to comply with Section 10, and except to the extent such shares have been forfeited as provided in Section 7(E) or 7(G) below.

     (ii) Restricted shares under the Program which are subject to a Restriction Period may not be assigned, transferred, pledged or otherwise encumbered or disposed of, except by forfeiture to the Company as provided in Section 7(E) or 7(G) below.

     (iii) During the applicable Restriction Period: (x) the Company shall retain possession of the certificates for restricted shares awarded under the Program, (y) the participant shall execute and deliver to the Company a stock power in blank with respect to such shares and (z) the participant shall be entitled to full dividend and voting rights in respect of such shares. After the end of the applicable Restriction Period, the restrictions imposed under the Program shall cease to apply to the shares previously subject to such Restriction Period and the certificates for such shares shall be delivered to the participant.

     (D) In the event of termination of employment (or service as a non-employee director) by reason of death, disability or retirement at normal retirement age under the Company’s Retirement Plan or any applicable Retirement Plan of any of the Company’s subsidiaries (or any applicable retirement policy for non-employee directors), the written Award agreement may provide that the restrictions imposed under the Program in respect of any Awards then subject to a Restriction Period, except Qualifying Awards, shall terminate as of the date of such termination of employment (or service as a non-employee director).

     (E) In the event of termination of employment (or service as a non-employee director) for any reason other than as provided in Section 7(D) above, a participant shall forfeit all rights in respect of any shares then subject to a Restriction Period as of the date of such termination of employment (or service as a non-employee director), absent a contrary determination by the Committee pursuant to the terms of any Award implementing the provisions of Section 12 in connection with a Change in Control Event.

     (F) With respect to restricted share Awards granted prior to 1997, in the event of a merger, consolidation, sale of all or substantially all of the Company’s assets, or other corporate reorganization in which the Company is not the surviving corporation, the restrictions imposed under the Program in respect of any shares then subject to a Restriction Period shall terminate as of the date of such event or as of such earlier date as determined by the Committee. With respect to restricted share Awards granted after 1996, the terms of the particular Awards will govern the extent (if any) to which the restrictions on such restricted shares may terminate as a result of any transaction described in the immediately preceding sentence, and in such regard may refer to the provisions of Section 12.

     (G) To the extent all or a portion of a restricted share Award is subject to additional vesting

25

terms and conditions (such as performance goals) imposed by the Committee to supplement the vesting schedule established for such Award, and such additional terms and conditions are not satisfied during the applicable period established for satisfying such terms and conditions, the restricted shares subject to such additional vesting terms and conditions shall be forfeited as of the end of the period during which such vesting terms and conditions were to be satisfied. This special forfeiture provision applies only to the number of restricted shares for which a special vesting term or condition is not satisfied. To the extent a portion of the restricted shares granted initially as part of the same Award are not subject to any special vesting terms or conditions (other than the vesting schedule based on continued employment (or service as a non-employee director) over the vesting period) or are subject to special terms and conditions that have been satisfied, or may be satisfied by a later deadline, such restricted shares shall not be forfeited pursuant to this Section 7(G) unless and until the later deadline for satisfying any remaining special terms and conditions occurs without such terms and conditions being satisfied.

     Section 8. Phantom Stock Units. Awards of phantom stock units (“phantom units”) shall be based on a number of phantom shares of Common Stock determined by the Committee. The Company shall establish a book account (“Book Account”) on its records for each participant receiving an Award of phantom stock units and shall credit to a participant’s Book Account the number of phantom shares of Common Stock granted to such participant pursuant to the Award. No actual shares of Common Stock or other certificates shall be issued to a participant when a phantom unit Award is granted. Phantom unit Awards shall be evidenced by written agreements in such form as the Committee shall approve from time to time. A participant shall earn the amount credited to his or her Book Account from time to time in accordance with a schedule established by the Committee. The schedule shall provide that a participant’s interest will be earned in one or more increments over a period of time determined by the Committee and may require that certain performance goals be achieved. The Committee may establish a different schedule for each phantom unit Award and each participant.

     (A) From the time a phantom unit Award has been granted until the time it is settled or forfeited, the participant to whom the phantom units were awarded shall be entitled to receive, as additional compensation, cash payments equivalent to the amount of dividends that would be paid with respect to a number of shares of Common Stock corresponding to the number of phantom units represented by such Award.

     (B) No Award of phantom units shall confer on the participant any voting rights unless and until such phantom unit Award is paid to the participant in the form of actual shares of Common Stock.

     (C) Except as otherwise provided in Section 10 with respect to Qualifying Awards, if a participant ceases employment with (or service as a non-employee director of) the Company and its subsidiaries as a result of death, disability or retirement at normal retirement age under the Company’s Retirement Plan or any applicable Retirement Plan of any of the Company’s subsidiaries (or any applicable retirement policy for non-employee directors), the written Award agreement may provide that such participant (or his or her beneficiary) shall be entitled to such participant’s full interest in any phantom unit Award (whether or not earned) on the date of such termination (to the extent not previously paid). Upon termination of employment with (or service as a non-employee director of) the Company and its subsidiaries for any other reason, a participant’s interest in any unearned phantom unit Awards shall be forfeited, absent a contrary determination by the Committee pursuant to the terms of any Award implementing the provisions of Section 12 in connection with a Change in Control Event. Notwithstanding the preceding sentence, whenever a phantom unit Award is granted in substitution for restricted shares that were subject to an Award granted prior to 1997 and that are surrendered and cancelled in connection with the grant of such phantom unit Award, the Committee may provide in such phantom unit Award that such phantom units will become fully earned under the same circumstances as the restrictions applicable to the cancelled restricted shares would have terminated pursuant to Section 7(F).

     (D) When the Committee determines that a phantom unit Award is to be granted, the Committee shall give the participant an opportunity to elect the time(s) at which the amount credited to his or her Book Account, once earned, is to be paid in a form of payment determined under Section 8(E)

26

below. Thereafter, the participant may make one or more superseding elections to modify an earlier election in order to further defer (but not accelerate) the time(s) of payment, provided that any superseding election must be made prior to the tax year in which the payments affected by the further deferral would have otherwise been made. All elections under this Section 8(D) shall be made subject to the provisions of Section 8(E) below and to the following:

     (i) An election may specify that the amount credited to a participant’s Book Account will be paid to the participant in increments as soon as each increment becomes earned.

     (ii) Alternatively, an election may specify that the earned amounts credited to a participant’s Book Account will be paid to the participant in a lump sum or in increments at a specified time or times after they become earned even though the participant has not yet retired, or in substantially equal annual installments commencing as soon as practicable following the participant’s retirement from employment with (or service as a non-employee director of) the Company and its subsidiaries. At the time the participant makes an election, the participant shall designate the period over which the installment payments will be made. The Committee will have discretion to modify the form of installment payment designated by the participant, if the Committee deems such a modification to be appropriate and in the best interests of the Company. If a participant elects the deferred payment form of payment and dies after the installment payments begin, the remaining installments will be paid to the participant’s beneficiary according to the schedule of installments designated by the participant.

     (iii) The Committee may specify in a phantom unit Award or by rules adopted and amended from time to time reasonable limits on the minimum amounts and the frequency of payments that shall be required for a participant to elect multiple installments and a maximum time period (no sooner than five years following termination of a participant’s employment (or service as a non-employee director)) during which all earned amounts shall be paid.

     (E) Subject to any restrictions on the form of payment that may be specified by the Committee in the terms of any phantom unit Award, the Committee shall determine whether a payment shall be made: (i) in whole shares of Common Stock equal to the number of whole phantom shares of Common Stock credited to the participant’s Book Account, (ii) in cash, or (iii) in a combination of whole shares of Common Stock and cash, in such proportions as the Committee deems appropriate. When a payment is made in cash, the phantom shares of Common Stock then credited to the participant’s Book Account shall be valued, for purposes of the payment, at the fair market value of a share of Common Stock at the time the payment is made.

     (F) The Committee shall have the right to defer payment of a participant’s phantom unit Awards, when earned, to the extent that the sum of (i) the participant’s phantom unit Awards that have been earned and are scheduled to be settled plus (ii) all other “compensation” (as defined for purposes of Section 162(m) of the Code) with respect to the participant for the taxable year in which settlement of the earned phantom unit Awards would otherwise be deductible, may not be deductible by the Company by reason of Section 162(m) of the Code, as determined by the Committee in its sole discretion. A phantom unit Award deferred pursuant to this Section 8(F) shall be settled in subsequent taxable years of the Company to the extent that the sum of the participant’s deferred, but earned, phantom unit Awards and all other “compensation” with respect to the participant would be deductible by the Company under Section 162(a) of the Code. This Section 8(F) shall apply only to the extent that the Committee determines in its sole discretion that the deferral could allow settlement of the phantom unit Awards to be deductible in a future year. The Committee’s determination shall be final and binding.

     Section 9. Unrestricted Shares. Awards of unrestricted shares of Common Stock of the Company may be granted by the Committee from time to time in its discretion to participants in consideration of services rendered to the Company or its subsidiaries; provided that the Committee obtains adequate authorization (whether in advance or as ratification) from the Board of Directors to the extent required to comply with Sections 33-6-210(b)

27

and 33-8-250(e)(8) of the South Carolina Business Corporation Act of 1988, as it may be amended from time to time (the “SCBCA”), or any successor provisions, all as in effect at the time of any such grants. Without limiting the preceding sentence, but subject to the proviso therein, Awards of unrestricted shares may be granted by the Committee from time to time to directors of the Company or its subsidiaries in lieu of or as a supplement to cash fees for services rendered as directors.

     Section 10. Qualifying Awards. The Committee may, in its sole discretion, grant an Award (other than unrestricted shares) to any participant with the intent that such Award as “performance-based compensation” under Section 162(m) of the Code (a “Qualifying Award”). Qualifying Awards may be issued as stock options or, if the settlement or vesting of the Award is conditioned upon achievement of performance goals established pursuant to Section 10(A) below, as restricted shares, phantom stock units or performance units. Unless otherwise specified in writing by the Committee, either at the time an Award is granted or at any time thereafter, all Awards issued under the Program that are either stock options or Awards as to which the settlement or vesting of the Award is conditioned upon achievement of performance goals established by the Committee in accordance with Section 10(A) below, shall be treated as Qualifying Awards. The provisions of this Section 10, as well as other applicable provisions of the Plan not inconsistent with this Section 10, shall apply to all Qualifying Awards issued under the Program.

     (A) For Qualifying Awards, all amounts received upon the settlement or vesting of restricted shares, phantom stock units and performance units shall be based upon the attainment of performance goals established by the Committee in accordance with Section 162(m) of the Code. Such performance goals may vary by participant and by Award. For Awards granted on or after May 6, 1997 (or granted prior to such date if their grant was conditioned upon approval of amendments to the Program by the shareholders at their annual meeting on May 6, 1997), such performance goals shall be based on any one or more (or any combination) of the following business criteria: revenues, net income (before or after tax), earnings, earnings per share, shareholders’ equity, return on equity, assets, return on assets, capital, return on capital, book value, economic value added, operating margins, profit margins, cash flow, shareholder return, expenses, sales or market share, expense management, return on investment, improvements in capital structure, budget comparisons, profitability of an identifiable business unit or product, or stock price, or shall be based on any one or more (or any combination) of the foregoing business criteria: (1) before the effect of acquisitions, divestitures, accounting changes, restructuring or other special charges or other extraordinary items or (2) after giving effect to an adjustment to reflect any such transaction or extraordinary item, to the extent in each such case the Committee specifies, when granting the Award, that the effect of any such transactions or extraordinary items shall be disregarded or that a particular formula or other objective method shall be used to make an appropriate adjustment to reflect any such transaction or extraordinary item.

     (i) The foregoing business criteria and the performance goals established by the Committee may be applicable to the Company as a whole, one or more of its subsidiaries, divisions, business units or business lines, or any combination of the foregoing. The performance goals also may be based on the attainment of specified levels of Company performance under one or more of the business criteria described above relative to the performance of other corporations.

     (ii) The Committee may condition the settlement or vesting of any such Award on the attainment of other conditions, such as completion of a period of service, that must be satisfied in addition to the performance goal or goals specified in the Award and that may apply during the same or a different time period than the period used for the performance goal or goals.

     (B) The Committee shall have the discretion, by participant and by Award, to reduce (but not to increase) some or all of the amount that would otherwise be payable under the Award by reason of the satisfaction of the performance goals set forth in the Award. In making any such determination, the Committee is authorized to take into account any such factor or factors it determines are appropriate, including but not limited to Company, business unit and individual performance.

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     (C) Prior to payment of any Qualifying Award, the Committee shall certify in writing that the performance goals and any other material terms of the Award were in fact satisfied, all in a manner consistent with the applicable regulations under Section 162(m) of the Code. Such certification shall not be required, however, for compensation that is attributable solely to an increase in the value of the Company’s Common Stock.

     (D) If a participant leaves employment with the Company and its subsidiaries as a result of death, disability or retirement, the written Award agreement may provide that any stock options shall become fully exercisable and/or that any restrictions with respect to any other forms of Qualifying Awards shall terminate, in each case as of the date of such termination, subject to the Committee’s authority under Section 10(E) as to the timing or receipt, payment or settlement of such Qualifying Award.

     (E) Except in the case of a stock option (as to which the holder decides when to exercise consistent with applicable provisions in the Program and option agreement), the Committee is authorized to defer or accelerate the actual receipt, payment or settlement of any Qualifying Award to the extent it is or becomes vested or owned, and the applicable performance goals have been satisfied, at or prior to the time of termination of the holder’s employment for any reason (including Awards that become vested or owned in accordance with this Section 10 and Section 5 as a result of such termination) or to the extent the Qualifying Award is or will be vested or owned, and the applicable performance goals have been satisfied, at the time of receipt, payment or settlement during employment; provided, however, that if any “payment of compensation” (other than a “transfer of property”), as such terms are used in the regulations adopted under Section 162(m), is accelerated, the amount of compensation paid shall be discounted to reasonably reflect the time value of money, except to the extent such discounting is not necessary to comply with the regulations under Section 162(m) of the Code when acceleration occurs as a result of termination of employment due to the death or disability of a holder of an Award.

     Section 11. Withholding. Whenever the Company proposes or is required to issue or transfer shares of Common Stock or issue a certificate free of restrictions for vesting shares previously subject to forfeiture under the Program, the Company shall have the right to require the participant to remit to the Company an amount sufficient to satisfy any applicable federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such shares. Whenever under the Program payments are to be made in cash, such payments shall be net of an amount sufficient to satisfy any applicable federal, state and local withholding tax requirements. A participant may elect with respect to any stock option (other than an incentive stock option), restricted share award, restricted stock unit or performance unit to surrender or authorize the Company to withhold shares of Common Stock (valued at current fair market value on the date of surrender or withholding of the shares) in satisfaction of all such applicable withholding requirements (the “Stock Surrender Withholding Election”); provided, however, that:

     (A) Any Stock Surrender Withholding Election shall be made by written notice to the Company and thereafter shall be irrevocable by the participant;

     (B) If a participant is an “officer” of the Company or other person subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any successor law, any Stock Surrender Withholding Election shall be subject to any additional rules established from time to time by the Committee;

     (C) Any Stock Surrender Withholding Election must be made prior to the date on which the participant recognizes taxable income with respect to the receipt of such shares (the “Tax Date”);

     (D) When the Tax Date falls after the exercise of a stock option and the participant makes a Stock Surrender Withholding Election, the full number of shares of Common Stock subject to the stock option being exercised will be issued, but the participant will be unconditionally obligated to deliver to the Company on the Tax Date a number of shares of Common Stock having a value on the Tax Date equal to the participant’s federal, state and local withholding tax requirements; and

29

     (E) For purposes of this Section, the Committee shall have the discretion to provide (by general rule or a provision in a specific Award document) that, at the election of the participant (and subject to such conditions as the Committee may impose by general rule or in a provision in a specific Award document), “federal, state and local withholding tax requirements” shall be deemed to be any amount designated by the participant which exceeds the amount required by applicable law and governmental regulations to be withheld but which does not exceed the participant’s total estimated federal, state and local tax obligations associated with the transaction, including FICA taxes to the extent applicable.

     Shares subject to an Award under the Program that are surrendered or withheld under this Section 11 to satisfy a participant’s federal, state and local withholding tax obligations shall not thereby become available for use again under the Program.

     Section 12. Committee Authority To Accelerate Right of Exercise and Accelerate Vesting in Certain Circumstances. The Committee may determine when granting any Award (and may specify in the Award document) or may determine at any time after granting an Award (in circumstances deemed appropriate by the Committee) that notwithstanding the fact that an outstanding stock option has not otherwise become exercisable in full in accordance with its terms and notwithstanding any conditions to the vesting or earning of a participant’s rights with respect to any Award of restricted shares, phantom stock units or performance units, such Award shall become fully exercisable (in the case of stock options) or otherwise shall become fully exercisable and fully vested and earned upon a “Change in Control Event” described in this Section 12 or upon any termination of such participant’s employment with (or service as a director of) the Company or its subsidiary or significant reduction in such participant’s responsibilities or compensation following any such Change in Control Event. Such determinations may be different as to different Awards.

     Except as otherwise provided in any Award agreement, a “Change of Control Event” shall be deemed to have occurred in the event of:

     (i) the sale, lease or exchange of all or substantially all of the assets of the Company or of the assets of Cosmos Broadcasting Corporation (other than to a person that directly or indirectly controls, is controlled by or is under common control with, the Company);

     (ii) the acquisition, directly or indirectly, by any person or related group of persons (other than the Company, a person that directly or indirectly controls, is controlled by or is under common control with, the Company) of the beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934 as amended) of securities possessing more than thirty-five percent (35%) of the total combined voting power of the Company’s outstanding securities, unless such person or related group of persons acquired such beneficial ownership as a result of (1) the reduction in the number of shares of Common Stock outstanding due to the Company’s acquisition of its Common Stock, (2) a will or the laws or descent and distribution, (3) the transfer of shares to any member of the transferor’s immediate family or to a trust for the benefit of a member of the transferor’s immediate family (a “Transferee Trust”), (4) a divorce decree or settlement, (5) the transfer of shares held on February 4, 1997 by any trust or held at any time by a Transferee Trust to any beneficiary of such trust, or (6) any acquisition by such person of shares pursuant to any employee benefit plan of the Company or of any of its subsidiaries;

     (iii) a change in the composition of the Board of Directors that results in the individuals who, as of November 27, 2000, are members of the Board (the “Incumbent Board”), ceasing for any reason to constitute at least a majority of the members of the Board; provided, however, that if the election, or nomination for election by the Company’s common stockholders, of any new director is approved by a vote of at least a majority of the Incumbent Board, such new director shall, for purposes of this Program, be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office in any of the following manners: (a) as a result of either an actual or threatened “Election Contest” (as described in Rule 14a-11 promulgated under the Exchange Act); (b) as a result of other

30

actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a “Proxy Contest”); and (c) by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest;

     (iv) the merger or consolidation of the Company with or into another entity, or of Cosmos Broadcasting Corporation with or into another entity (other than the Company, a person that directly or indirectly controls, is controlled by or is under common control with, the Company), unless the shareholders of the Company immediately prior to such merger or consolidation own, directly or indirectly, more than sixty-five percent (65%) of the total combined voting power of the surviving entity’s outstanding securities immediately after such merger or consolidation; or

     (v) the liquidation or dissolution of the Company or Cosmos Broadcasting Corporation (other than in connection with a transaction excepted under clause (i), (ii), (iii) or (iv) above).

     Section 13. Regulatory and Other Legal Requirements. All aspects of this Program shall be subject to applicable laws, rules, regulations and approvals required by governmental entities and stock exchanges. Without limiting the foregoing, the issuance of shares of the Company’s Common Stock under the Program is subject to applicable provisions of the SCBCA (or any successor laws); without in any way abdicating its decision making authority in connection with the grant of any Awards hereunder (including, but not limited to, the Committee’s authority to establish and administer performance goals and certify as to the attainment of any such performance goals), the Committee may obtain further parameters from the Board of Directors within which to exercise the Committee’s authority or may obtain ratification of the Committee’s decisions by the full Board of Directors or may do both to the extent deemed appropriate to comply with the SCBCA (including Sections 33-6-210(b) and 33-8-250(e)(8)) or any successor laws.

     Section 14. Grantor Trusts. The Committee may, in its discretion and in a manner consistent with Section 13, establish one or more grantor trusts (with such terms as the Committee may determine) and contribute shares of Common Stock and such other assets as may be deemed desirable for use in satisfying the Company’s obligations to one or more participants under one or more Awards granted hereunder. The creation and funding of any such trust with respect to one or more Awards shall not create any obligation on the part of the Company or any rights in participants receiving other Awards to have the same or any similar trust created or funded with respect to other Awards. If any such trust is used for purposes of satisfying the Company’s obligations to any participant under an Award, the Company shall be relieved of its obligation to satisfy any claim for benefits under such Award to the extent such participant receives a distribution from the trust of the shares of Common Stock or other assets due in accordance with the Award, but the Company shall remain liable for any balance due that is not received from such trust.

     Section 15. Term. This Program initially became effective May 3, 1983 for ten years and was amended, with shareholder approval, in 1990 to extend its term to May 1, 2000. Subject to approval of certain amendments by the shareholders of the Company at their annual meeting to be held on May 6, 1997 or at any adjournment thereof, this Program has been further amended, effective on the date of such shareholder approval, to extend its term to May 6, 2007 unless terminated at an earlier date by the Board. No Awards shall be granted after termination of the Program, but any then outstanding Awards shall continue in effect for the remainder of their respective terms, subject to the conditions of such Awards. No incentive stock options may be granted after February 4, 2007, which is ten years after the Committee’s adoption of the Program as most recently extended and restated.

     Section 16. Amendments and Discontinuance. The Committee may amend, suspend, or discontinue the Program; provided, however, that the Committee may condition the effectiveness of any amendment on shareholder approval to the extent the Committee determines that shareholder approval is necessary or desirable to qualify for: certain tax deductions or other desired treatment under Section 162(m) or other Sections of the Code and related regulations of the Internal Revenue Service, all as amended from time to time; certain exemptions under Section 16 of the Securities Exchange Act of 1934 and related rules adopted by the Securities and Exchange Commission, all as amended from time to time; or any other desired exemption or treatment under any applicable law or regulation. Notwithstanding the foregoing, no such amendment shall materially and adversely affect the rights of any participant as to any Award then outstanding without the consent of such participant.

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EX-31

EXHIBIT 31

CERTIFICATIONS

     I, Hayne Hipp, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of The Liberty Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 1, 2005

/s/ Hayne Hipp

Hayne Hipp

Chairman and Chief Executive Officer

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EXHIBIT 31

CERTIFICATIONS

I, Howard L. Schrott, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of The Liberty Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 1, 2005

/s/ Howard L. Schrott

Howard L. Schrott

Chief Financial Officer

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EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of The Liberty Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Hayne Hipp	/s/ Howard L. Schrott
Hayne Hipp	Howard L. Schrott
Chief Executive Officer	Chief Financial Officer
November 1, 2005	November 1, 2005

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