10. COMMON STOCK AND STOCK PLANS

Common Stock

We have two classes of stock; Class A and Class B Common Stock. Both classes of stock participate equally in dividends. Holders of Class B are entitled to one vote per share and to elect as a class 75% of the Board of Directors, rounded down to the nearest whole number. Holders of Class A Common Stock are entitled to one-tenth of a vote per share and to elect as a class 25% of the Board of Directors, rounded up to the nearest whole number.

Class B Common Stock is convertible at the option of the holder into Class A Common Stock on a share-for-share basis.

The holders of shares of Class B Common Stock are parties to an agreement, the intent of which is to preserve control of the Company by the McClatchy family. Under the terms of the agreement, the Class B shareholders have agreed to restrict the transfer of any shares of Class B Common Stock to one or more "Permitted Transferees," subject to certain exceptions. A "Permitted Transferee" is any of our current holders of shares of Class B Common Stock; any lineal descendant of Charles K. McClatchy (1858 to 1936); or a trust for the exclusive benefit of, or in which all of the remainder beneficial interests are owned by, one or more lineal descendants of Charles K. McClatchy.

Generally, Class B shares can be converted into shares of Class A Common Stock and then transferred freely (unless, following conversion, the outstanding shares of Class B Common Stock would constitute less than 25% of the total number of all our outstanding shares of common stock). In the event that a Class B shareholder attempts to transfer any shares of Class B Common Stock in violation of the agreement, or upon the happening of certain other events enumerated in the agreement as "Option Events," each of the remaining Class B shareholders has an option to purchase a percentage of the total number of shares of Class B Common Stock proposed to be transferred equal to such remaining Class B shareholder's ownership percentage of the total number of outstanding shares of Class B Common Stock. If all the shares proposed to be transferred are not purchased by the remaining Class B shareholders, we have the option of purchasing the remaining shares. The agreement can be terminated by the vote of the holders of 80% of the outstanding shares of Class B Common Stock who are subject to the agreement. The agreement will terminate on September 17, 2047, unless terminated earlier in accordance with its terms.

Stock Plans

During fiscal year 2012, we had five stock-based compensation plans, which are described below.

We have two stock option plans which reserved Class A Common shares for issuance to key employees – the 1994 and 1997 plans ("Employee Plans"). Terms of each of the Employee Plans are substantially the same. Options are granted at the market price of the Class A Common Stock on the date of grant. The options vest in installments over four years, and once vested are exercisable up to 10 years from the date of grant. Although the plans permit us, at our sole discretion, to settle unexercised options by granting stock appreciation rights, we do not intend to avail ourselves of this alternative for option grants made under these plans. Both of these plans (which had 122,500 outstanding grants at December 30, 2012) have expired and have been replaced by the 2004 stock incentive plan.

Our amended and restated stock option plan for outside directors (the "2001 Director Plan") provided for the issuance of shares of Class A Common Stock. Generally, under this plan each non-employee director was granted, at the conclusion of each regular annual meeting of stockholders, an option to purchase shares of Class A Common Stock at fair market value on the date of the grant. Terms of the 2001 Director Plan are similar to the terms of the Employee Plans. This plan (which had 21,000 outstanding grants at December 30, 2012) expired and was replaced by the 2004 stock incentive plan (see the discussion below).

We have a stock incentive plan (the "2004 Plan") that reserves 9,000,000 Class A Common shares for issuance to key employees and outside directors. Terms of the 2004 Plan are similar to the Employee Plans and 2001 Director Plan, except that the 2004 Plan permits the following type of incentive awards in addition to common stock, stock options and stock appreciation rights ("SARs"): restricted stock, unrestricted stock, stock units and dividend equivalent rights.

We award stock-settled SARs in lieu of stock options. The SARs were granted at fair market value, have a 10-year term and generally vest in four equal annual installments beginning on March 1 following the year for which the award was made.

In May 2012 the shareholders approved The McClatchy Company 2012 Omnibus Incentive Plan ("2012 Plan"). The 2012 Plan generally provides for granting of stock options or SARs only at an exercise price at least equal to fair market value on the grant date; a 10-year maximum term for stock options and SARs; no repricing of stock options or SARs without prior shareholder approval; and no reload or "evergreen" share replenishment features.

Prior to fiscal year 2012, we also had an Amended Employee Stock Purchase Plan (the "Purchase Plan"), which reserved 4,625,000 shares of Class A Common Stock for issuance to employees. Eligible employees were able to purchase shares at 85% of "fair market value" (as defined by the Purchase Plan) through payroll deductions. In the third quarter of fiscal year 2011, we issued shares from our Purchase Plan that exhausted substantially all of the shares reserved under the plan for issuance and we suspended the plan at that time.

Stock Plans Activity

In fiscal year 2012, we granted 15,000 shares of Class A Common Stock to each non-employee director, resulting in the issuance of 150,000 shares from the 2012 Plan. In fiscal year 2011, we granted 15,000 shares of Class A Common Stock to each non-employee director, resulting in the issuance of 150,000 shares from the 2004 Plan.

We granted restricted stock units ("RSUs") at fair market value on the date of grant to certain key employees from the 2004 Plan and 2012 Plan as summarized below. The RSUs generally vest two to three years after grant date but terms of each grant is at the discretion of the compensation committee of the board of directors.

The following table summarizes the RSUs stock activity:

			Weighted Average Grant Date Fair Value

Nonvested – December 27, 2009	845,000		$	3.42

Nonvested – December 26, 2010	845,000		$	3.42
Granted	740,000		$	4.08
Forfeited	(140,000	)	$	3.70

Nonvested – December 26, 2011	1,445,000		$	3.73
Granted	1,082,000		$	2.59
Vested	(765,000	)	$	3.42
Forfeited	(660,000	)	$	3.48

Nonvested – December 30, 2012	1,102,000		$	2.98

As of December 30, 2012, the total fair value of the RSUs that vested during the period was $2.0 million. As of December 30, 2012, there were $1.5 million of unrecognized compensation costs for nonvested RSUs, which are expected to be recognized over 1.8 years.

Outstanding options and SARs are summarized as follows:

			Weighted Average Exercise Price		Aggregate Intrinsic Value (in thousands)

Outstanding December 26, 2009	7,039,850		$	26.79	$	3,086
Granted	10,000		$	4.96
Exercised	(119,250	)	$	1.70	$	388
Forfeited	(44,250	)	$	7.07
Expired	(254,150	)	$	40.53

Outstanding December 26, 2010	6,632,200		$	26.82	$	6,060
Granted	1,078,500		$	4.08
Exercised	(152,750	)	$	1.73	$	382
Forfeited	(132,250	)	$	3.99
Expired	(702,450	)	$	47.86

Outstanding December 25, 2011	6,723,250		$	22.01	$	874
Granted	1,017,500		$	2.76
Exercised	(27,250	)	$	1.70	$	33
Forfeited	(1,217,750	)	$	54.52
Expired	(301,250	)	$	48.33

Outstanding December 30, 2012	6,194,500		$	11.45	$	1,846

Vested and Expected to Vest December 30, 2012	5,970,603		$	11.74	$	1,810

Options exercisable:
December 26, 2010	3,572,450				$	869
December 25, 2011	4,082,500				$	397
December 30, 2012	3,826,250				$	1,335

As of December 30, 2012, there were $2.6 million of unrecognized compensation costs related to options and SARs granted under our plans. The cost is expected to be recognized over a weighted average period of 2.5 years.

The following tables summarize information about stock options and SARs outstanding in the stock plans at December 30, 2012:

Range of Exercise Prices			Weighted Average Exercise Price			Weighted Average Exercise Price

$1.50 – $9.07	4,273,500	6.85	$	2.94	1,941,000	$	2.65
$9.73 – $35.94	1,128,750	4.17	$	13.20	1,128,750	$	13.20
$40.95 – $73.36	756,500	2.63	$	54.93	756,500	$	54.93

Total	6,158,750	5.82	$	11.45	3,826,250	$	16.10

The weighted average remaining contractual life on options exercisable at December 30, 2012, was 4.46 years. The weighted average remaining contractual life of options vested and expected to vest at December 30, 2012, was 5.73 years. The fair value of the stock options and SARs granted was estimated on the date of grant using a Black-Scholes option valuation model that uses the assumptions noted in the following table. The expected life of the options represents the period of time that options granted are expected to be outstanding using the historical exercise behavior of employees. The expected dividend yield is based on historical dividends declared per year, giving consideration for any anticipated change and the estimated stock price over the expected life of the options based on historical experience. Expected volatility was based on historical volatility for a period equal to the stock option's expected life for shares granted. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

	2012		2011		2010

Expected life in years		6.52		6.16		6.10
Dividend yield		NIL		NIL		NIL
Volatility		0.90		0.87		0.83
Risk-free interest rate		1.22%		2.53%		2.77%
Weighted average exercise price of options/SARs granted	$	2.76	$	4.08	$	4.96
Weighted average fair value of options/SARs granted	$	2.09	$	3.03	$	3.57

Through the third quarter of fiscal year 2011, we also offered eligible employees the option to purchase Class A Common Stock under the Purchase Plan. The expense associated with the plan was computed using a Black-Scholes option valuation model with similar assumptions to those described for stock options, except that volatility is computed using a one-year look back given the short-term nature of this option. Expense associated with the Purchase Plan is included in the stock-related compensation. There was no such plan or expense during fiscal year 2012.