10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

	[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended:   July 1, 2007
	or
	[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	[  ]  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: 1-9824
(Exact name of registrant as specified in its charter)

Delaware	52-2080478
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2100 "Q" Street, Sacramento, CA	95816
(Address of principal executive offices)	(Zip Code)

916-321-1846

Registrant's telephone number, including area code

Indicate by check mark whether the registrant has (1) 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 (check one):   [ X ] Yes      [   ]  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act (check one):     Large accelerated filer [X]           Accelerated filer [  ]          Non-accelerated filer [  ]

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

As of August 8, 2007, the registrant had shares of common stock as listed below outstanding:

Class A Common Stock	56,985,873
Class B Common Stock	25,112,430

Table of Contents

THE McCLATCHY COMPANY

INDEX TO FORM 10-Q

Part I - FINANCIAL INFORMATION	Page
Item 1 - Financial Statements (unaudited):
Consolidated Balance Sheet– July 1, 2007 and December 31, 2006		1
Consolidated Statement of Income for the three and six months ended July 1, 2007 and June 25, 2006		3
Consolidated Statement of Cash Flows for the six months ended July 1, 2007 and June 25, 2006		4
Consolidated Statement of Stockholders' Equity for the period December 31, 2006 to July 1, 2007		5
Notes to Consolidated Financial Statements		6
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of  Operations		19
Item 3 - Quantitative and Qualitative Disclosures About Market Risk		31
Item 4 - Controls and Procedures		31
Part II - OTHER INFORMATION
Item 1A - Risk Factors		32
Item 4 - Submission Of Matters To A Vote Of Security Holders		33
Item 6 - Exhibits		33
Signatures		34
Index of Exhibits		35

PART I - FINANCIAL INFORMATION

Item 1 - FINANCIAL STATEMENTS

THE MCCLATCHY COMPANY
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(In thousands)
	July 1,			December 31,
	2007			2006
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	25,271		$	19,581
Trade receivables (less allowance of
$11,682 in 2007 and $12,732 in 2006)		271,332			311,785
Other receivables		24,083			36,477
Newsprint, ink and other inventories		40,813			52,097
Deferred income taxes		47,055			248,753
Prepaid income taxes		92,640			88,836
Land and other assets held for sale		25,669			231,029
Other current assets		20,128			23,192
Newspaper assets held for sale		-			563,589
		546,991			1,575,339
PROPERTY, PLANT AND EQUIPMENT:
Land		205,042			204,692
Building and improvements		391,883			382,206
Equipment		833,947			811,173
Construction in progress		21,895			36,401
		1,452,767			1,434,472
Less accumulated depreciation		(497,530	)		(458,496	)
		955,237			975,976
INTANGIBLE ASSETS:
Identifiable intangibles -net		1,339,135			1,369,046
Goodwill-net		3,586,969			3,559,828
		4,926,104			4,928,874
INVESTMENTS AND OTHER ASSETS:
Investments in unconsolidated companies		499,458			520,213
Income tax refund		200,998			-
Land held for sale		186,365			-
Prepaid pension assets		29,332			32,457
Other		20,296			21,851
		936,449			574,521
TOTAL ASSETS	$	7,364,781		$	8,054,710
See notes to consolidated financial statements.

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THE MCCLATCHY COMPANY
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(In thousands, except share amounts)
	July 1,			December 31,
	2007			2006
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of bank debt	$	-		$	530,000
Accounts payable		101,766			139,501
Accrued compensation		108,060			135,363
Income taxes		-			47,330
Unearned revenue		87,282			82,524
Accrued interest		33,677			33,697
Accrued dividends		14,769			14,727
Other accrued liabilities		39,944			45,166
Newspaper liabilities held for sale		-			83,806
		385,498			1,112,114
NON-CURRENT LIABILITIES:
Long-term debt		2,677,338			2,746,669
Deferred income taxes		708,314			706,893
Pension and postretirement obligations		313,363			311,127
Other long-term obligations		106,450			74,283
		3,805,465			3,838,972
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock $.01 par value:
Class A - authorized 200,000,000 shares,
issued 56,907,576 in 2007 and 55,795,162 in 2006		569			557
Class B - authorized 60,000,000 shares,
issued 25,191,397 in 2007 and 26,116,397 in 2006		252			261
Additional paid-in capital		2,193,132			2,182,544
Retained earnings		1,028,546			1,016,023
Treasury stock, 3,029 shares at cost		(122	)		-
Accumulated other comprehensive loss		(48,559	)		(95,761	)
		3,173,818			3,103,624
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	7,364,781		$	8,054,710
See notes to consolidated financial statements.

2

THE McCLATCHY COMPANY
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(In thousands, except per share amounts)
	Three Months Ended						Six Months Ended
	July 1,			June 25,			July 1,			June 25,
	2007			2006			2007			2006
REVENUES - NET:
Advertising	$	488,277		$	183,683		$	965,300		$	350,017
Circulation		69,707			23,504			141,587			47,268
Other		22,043			4,813			39,698			9,178
		580,027			212,000			1,146,585			406,463
OPERATING EXPENSES:
Compensation		228,959			84,103			465,283			169,842
Newsprint and supplements		72,186			27,267			147,603			53,531
Depreciation and amortization		38,357			9,973			76,190			19,860
Other operating expenses		123,144			38,396			252,740			75,690
		462,646			159,739			941,816			318,923
OPERATING INCOME		117,381			52,261			204,769			87,540
NON-OPERATING (EXPENSES) INCOME:
Interest expense		(49,556	)		-			(103,341	)		-
Interest income		42			15			106			28
Equity income (losses) in unconsolidated companies, net		(11,198	)		496			(20,947	)		892
Other - net		791			(38	)		743			(45	)
		(59,921	)		473			(123,439	)		875
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAX PROVISION		57,460			52,734			81,330			88,415
INCOME TAX PROVISION		22,929			20,545			32,286			34,445
INCOME FROM CONTINUING OPERATIONS		34,531			32,189			49,044			53,970
INCOME (LOSS) FROM DISCONTINUED OPERATIONS - NET OF INCOME TAXES		705			11,947			(4,778	)		17,893
NET INCOME	$	35,236		$	44,136		$	44,266		$	71,863
NET INCOME PER COMMON SHARE:
Basic:
Income from continuing operations	$	0.42		$	0.69		$	0.60		$	1.15
Income (loss) from discontinued operation		0.01			0.25			(0.06	)		0.39
Net income per share	$	0.43		$	0.94		$	0.54		$	1.54
Diluted:
Income from continuing operations	$	0.42		$	0.69		$	0.60		$	1.15
Income (loss) from discontinued operation		0.01			0.25			(0.06	)		0.38
Net income per share	$	0.43		$	0.94		$	0.54		$	1.53
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic		81,976			46,771			81,931			46,753
Diluted		82,037			46,985			82,010			47,028
See notes to consolidated financial statements.

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THE McCLATCHY COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(In thousands)
	Six Months Ended
	July 1,			June 25,
	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations	$	49,044		$	53,970
Reconciliation to net cash provided by continuing operations:
Depreciation and amortization		76,190			19,860
Contribution to pension plans		-			(31,545	)
Employee benefit expense		16,956			8,710
Stock compensation expense		4,292			3,621
Deferred income taxes		-			(2,718	)
Equity loss (income) in unconsolidated companies		20,947			(892	)
Other		2,735			115
Changes in certain assets and liabilities:
Trade receivables		40,453			2,254
Inventories		11,279			(158	)
Other assets		7,537			(8,930	)
Accounts payable		(31,340	)		(11,711	)
Accrued compensation		(26,573	)		(1,714	)
Income taxes		(44,580	)		24,817
Other liabilities		(8,810	)		1,701
Net cash provided by operating activities of continuing operations		118,130			57,380
Net cash provided by operating activities of discontinued operations		3,340			28,530
Net cash provided by operating activities		121,470			85,910
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(28,340	)		(18,955	)
Proceeds from sale of equipment		19,356			-
Equity investments and other - net		(806	)		206
Net cash used by investing activities of continuing operations		(9,790	)		(18,749	)
Proceeds from sale of newspaper		522,922			-
Other		(4,837	)		(5,103	)
Net cash provided (used) by investing activities of discontinued operations		518,085			(5,103	)
Net cash provided (used) by investing activities		508,295			(23,852	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of term bank debt		(350,000	)		-
Net borrowings (repayments) from revolving bank debt		(250,508	)		109,000
Net repayments from commercial paper		-			(154,200	)
Payment of cash dividends		(29,495	)		(16,842	)
Other - principally stock issuances		5,928			2,831
Net cash used by financing activities		(624,075	)		(59,211	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		5,690			2,847
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		19,581			3,052
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	25,271		$	5,899
OTHER CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes (net of refunds)	$	82,033		$	18,120
Interest (net of capitalized interest)	$	98,319		$	2,719
See notes to consolidated financial statements

4

THE McCLATCHY COMPANY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
(In thousands, except share amounts)
											Accumulated
						Additional					Other
	Par Value					Paid-In		Retained			Comprehensive			Treasury
	Class A		Class B			Capital		Earnings			Loss			Stock			Total
BALANCES, DECEMBER 31, 2006	$	557	$	261		$	2,182,544	$	1,016,023		$	(95,761	)	$	-		$	3,103,624
Adoption of FIN 48									(2,218	)								(2,218	)
ADJUSTED BALANCES, JANUARY 1, 2007		557		261			2,182,544		1,013,805			(95,761	)		-			3,101,406
Net income									44,266									44,266
Pension amortization from other    comprehensive income												2,132						2,132
Total comprehensive income																		46,398
Adjustment to eliminate minimum pension    liability related to Star Tribune												45,070						45,070
Dividends declared ($.36 share)									(29,525	)								(29,525	)
Conversion of 925,000 Class B shares to    Class A shares		9		(9	)													-
Issuance of 228,109 Class A shares
under stock plans		3					5,747											5,750
Stock compensation expense							4,541											4,541
Tax benefit from stock plans							300											300
Purchase of treasury stock															(122	)		(122	)
BALANCES, JULY 1, 2007	$	569	$	252		$	2,193,132	$	1,028,546		$	(48,559	)	$	(122	)	$	3,173,818

5

THE McCLATCHY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1.  SIGNIFICANT ACCOUNTING POLICIES

The McClatchy Company (the "Company") is the third largest newspaper company in the United States, with 31 daily newspapers and approximately 50 non-dailies. Twenty of its daily newspapers were acquired on June 27, 2006 in the Knight Ridder acquisition (the "Acquisition") – see Note 2.  McClatchy also operates leading local websites and direct marketing operations in each of its markets which complement its newspapers and extend its audience reach in each market.  McClatchy-owned newspapers include The Miami Herald, The Sacramento Bee, the (Fort Worth) Star-Telegram, The Kansas City Star, The Charlotte Observer, and The (Raleigh) News & Observer.

McClatchy also has a portfolio of premium digital assets. Its leading local websites offer users information, comprehensive news, advertising, e-commerce and other services.  The Company owns and operates McClatchy Interactive, an interactive operation that provides websites with content, publishing tools and software development.  McClatchy operates Real Cities, the largest national advertising network of local news websites and owns 14.4% of CareerBuilder, the nation’s largest online job site.  McClatchy also owns 25.6% of Classified Ventures, a newspaper industry partnership that offers classified websites such as the nation’s number two online auto website, cars.com, and the number one rental site, apartments.com.

The consolidated financial statements include the Company and its subsidiaries.  Significant intercompany items and transactions are eliminated.  In preparing the financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary (consisting of normal recurring items, except as discussed in Note 2 and an adjustment to record the settlement of litigation by a company in which the Company is an investor as discussed in Note 3) to present fairly the Company's financial position, results of operations, and cash flows for the interim periods presented.  The financial statements contained in this report are not necessarily indicative of the results to be expected for the full year.

Discontinued operations - On March 5, 2007, the Company sold the (Minneapolis) Star Tribune newspaper and other publications and websites related to the newspaper to an entity affiliated with Avista Capital Partners for $530.0 million.  In addition, the Company expects a cash income tax refund equal to approximately $201 million related to the sale in 2008.  The results of Star Tribune's operations, including interest expense directly attributable to the Star Tribune, have been recorded as discontinued operations in all periods presented.

Revenue recognition - The Company recognizes revenues from advertising placed in a newspaper and/or on a website over the advertising contract period or as services are delivered, as appropriate, and recognizes circulation revenues as newspapers are delivered over the applicable subscription term.  Circulation revenues are recorded net of direct delivery costs.  Other revenue is recognized when the related product or service has been delivered.  Revenues are recorded net of estimated incentive offerings including special pricing agreements, promotions and other volume-based incentives.  Revisions to these estimates are charged to income in the period in which the facts that give rise to the revision become known.

6

Cash equivalents are highly liquid debt investments with original maturities of three months or less.

Concentrations of credit risk - Financial instruments, which potentially subject the Company to concentrations of credit risk, are principally cash and cash equivalents and trade accounts receivables.  Cash and cash equivalents are placed with major financial institutions.  The Company routinely assesses the financial strength of significant customers and this assessment, combined with the large number and geographic diversity of its customers, limits the Company's concentration of risk with respect to trade accounts receivable.

Inventories are stated at the lower of cost (based principally on the first-in, first-out method) or current market value.

Property, plant and equipment is stated at cost.  Major improvements, as well as interest incurred during construction, are capitalized.  Expenditures for maintenance and repairs are charged to expense as incurred.

Depreciation is computed generally on a straight-line basis over estimated useful lives of:

                            5 to 60 years for buildings and improvements

                            9 to 25 years for presses

                            2 to 15 years for other equipment

Goodwill and Intangible Impairment - The Company accounts for goodwill in accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.  As required by SFAS No. 142, the Company tests for goodwill annually or whenever events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.  The required two-step approach uses accounting judgments and estimates of future operating results.  Changes in estimates or the application of alternative assumptions and definitions could produce significantly different results.  The factors that most significantly affect the fair value calculation are private and public market trading multiples and estimates of future cash flows.  The Company periodically analyzes its intangible assets with indefinite lives for impairment.

Stock-based compensation - All share-based payments to employees, including grants of employee stock options, stock appreciation rights, restricted stock and purchases under the employee stock purchase plan ("ESPP"), are recognized in the financial statements based on their fair values.  At July 1, 2007, the Company had six stock-based compensation plans.  Total stock-based compensation expense from continuing operations was $2.2 million and $4.3 million for the three months and six months ended July 1, 2007, respectively and was $1.6 million and $3.6 million for the three months and six months ended June 25, 2006, respectively.

The Company has issued a total of 65,000 shares of restricted Class A Common Stock to its Chief Executive Officer: (1) 40,000 shares on January 25, 2005, valued at the Company's closing stock price on that date of $70.55, which vest on January 25, 2009, subject to certain performance criteria and (2) 25,000 shares on January 24, 2006, valued at the Company's closing stock price on that date of $58.05, which vest over four annual installments, subject to certain performance criteria, beginning on January 24, 2007.  On January 24, 2007, 6,250 shares vested.  At this time, the Company expects such performance criteria to be met and is expensing the related stock-based compensation over the respective four-year periods based on the grant date fair values.

7

Deferred income taxes result from temporary differences between amounts of assets and liabilities reported for financial and income tax reporting purposes.  Determination of deferred income taxes related to the Acquisition is subject to further adjustments based upon completion of deferred income tax assets and liabilities (see Note 2).

Comprehensive income (loss) - The Company records changes in its net assets from non-owner sources in its statement of stockholders’ equity.  These changes arise primarily from minimum pension liability adjustments.

The following table summarizes the composition of total comprehensive income (in thousands):

	For the three months ended				For the six months ended
	July 1, 2007		June 25, 2006		July 1, 2007		June 25, 2006
Net income	$	35,236	$	44,136	$	44,266	$	71,863
Pension amortization from other comprehensive income, net of tax		2,132		-		2,132		-
Total comprehensive income	$	37,368	$	44,136	$	46,398	$	71,863

Treasury stock - The Company accounts for treasury stock under the cost method.

Segment reporting - The Company's primary business is the publication of newspapers.  The Company aggregates its newspapers into a single reportable segment because each has similar economic characteristics, products, customers and distribution methods.

Earnings per share ("EPS") - Basic EPS excludes dilution from common stock equivalents and reflects income divided by the weighted average number of common shares outstanding for the period.  Diluted EPS is based upon the weighted average number of outstanding shares of common stock and dilutive common stock equivalents in the period.  Common stock equivalents arise from dilutive stock options and are computed using the treasury stock method.  The anti-dilutive stock options that could potentially dilute basic EPS in the future, but were not included in the weighted average share calculation for the three months and six months ended July 1, 2007 were 3,830,396 and 3,778,007, respectively and were 2,511,418 and 2,112,561 for the three months and six months ended June 25, 2006, respectively.

Reclassifications- Certain prior period amounts have been reclassified to conform to the 2007 presentation and relate primarily to accounting for the (Minneapolis) Star Tribune as a discontinued operation.

Income Taxes - On July 13, 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109 (“FIN 48”).  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return.  Under FIN 48, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant

8

taxing authority.  An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained.  Additionally, FIN 48 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  FIN 48 is effective for fiscal years beginning after December 15, 2006.

  The Company adopted the provisions of FIN 48 on January 1, 2007.  The total amount of unrecognized tax benefits as of the date of adoption was $66.7 million.  Of the $66.7 million of unrecognized tax benefits at January 1, 2007, $8.5 million are tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods.  The other $58.2 million of unrecognized tax benefits would, if recognized, result in a decrease to goodwill previously recorded related to acquisitions.  There were no material changes to these amounts through July 1, 2007.

With few exceptions, the Company is no longer subject to examination by U.S. federal, state, or foreign tax authorities for years before 2002.

NOTE 2.   ACQUISITION AND DIVESTITURES

Acquisition Transaction:

On June 27, 2006 (the second day of the Company's third fiscal quarter), the Company completed the purchase of Knight-Ridder, Inc. ("Knight Ridder") pursuant to a definitive merger agreement entered into on March 12, 2006, under which the Company paid Knight Ridder shareholders a per share price consisting of $40.00 in cash and .5118 of a Class A McClatchy common share (the "Acquisition").  The Company issued approximately 35 million Class A common shares in connection with the Acquisition.  The total purchase price was approximately $4.6 billion.  In addition, the Company assumed $1.9 billion in Knight Ridder long-term debt at closing.

Prior to the Acquisition, Knight Ridder published 32 daily newspapers in 29 U.S. markets, operated websites in all of its markets and owned a variety of internet and other investments which consisted of: 33.3% of each of CareerBuilder LLC ("CareerBuilder") and ShopLocal LLC ("ShopLocal"), 25.0% of Topix.net ("Topix"), 21.5% of Classified Ventures LLC ("Classified Ventures"), 33.3% interest in SP Newsprint Company ("SP"), 13.5% interest in the Ponderay Newsprint Company ("Ponderay") and 49.5% of The Seattle Times Company which owns The Seattle Times newspaper and weekly newspapers in the Puget Sound area, and daily newspapers located in Walla Walla and Yakima, Washington and in Portland, Maine and various other smaller investments.  Knight Ridder was the founder and operator of Real Cities, the largest national advertising network of local news websites.

To consummate the Acquisition, the Company borrowed $3.076 billion under a new bank debt facility (see Note 5) and used the proceeds from the sales of four Knight Ridder newspapers in order to pay Knight Ridder shareholders ($2.7 billion) and refinance its and Knight Ridder's bank debt ($498.0 million).  The after-tax proceeds from the sales of the eight Knight Ridder newspapers sold after the Acquisition closed were used to reduce debt.

Acquisition Accounting:

Pursuant to Emerging Issues Task Force No. 99-12, Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination, the McClatchy common stock issued on June 27, 2006 was valued based upon the average closing price of McClatchy common stock from March 8, 2006 through March 14, 2006 (two business days before and after the terms of the Acquisition were agreed to and announced), or $52.06 per share.   As a result, the fair value of the 35.0 million shares of McClatchy common stock issued in the Acquisition was recorded at $1.821 billion, which was included in the total Acquisition purchase price of approximately $4.6 billion.  The fair value of such shares declined to approximately $1.398 billion as of the Acquisition closing date (June 27, 2006), however the decline of $423.0 million in valuation had no effect on the total Acquisition purchase price recorded.  The difference is included in goodwill in the allocation of the purchase price below.

9

The Acquisition was accounted for as a purchase.  Pursuant to SFAS 141, Business Combinations, the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of June 27, 2006, the date of the Acquisition.  The purchase price allocation, while substantially complete, is subject to further adjustments based upon completion of analyses of deferred income tax assets and liabilities.  See Note 4 for adjustments made in the first six months of fiscal 2007.

The following table summarizes, on an unaudited pro forma basis, the combined results of continuing operations of the Company for the three and six months ended June 25, 2006 as though the Acquisition had taken place on the first day of the fiscal quarter (in thousands):

	Three Months Ended			Six Months Ended
	June 25, 2006			June 25, 2006
Revenues	$	632,433		$	1,228,728
Income from continuing operations	$	37,047	(1)	$	55,927	(1)
Income from continuing operations per diluted share	$	0.45		$	0.68
(1) Excludes $18.1 million of income tax benefits related to the Company’s recalculation of its deferred tax liabilities and assets.

Disposition Transactions:

In conjunction with the Acquisition, the Company divested 12 Knight Ridder newspapers for strategic and antitrust reasons.  The divested newspapers were the Philadelphia Inquirer;Philadelphia Daily News;San Jose Mercury News; St. Paul Pioneer Press; Akron Beacon Journal (OH); Wilkes Barre Times Leader (PA); Aberdeen American News (SD); Grand Forks Herald (ND); Ft. Wayne News-Sentinel (IN); Contra Costa Times (CA); Monterey Herald (CA); and Duluth News Tribune (MN).  The Company received cash proceeds of approximately $2.0 billion (net of transaction costs) from these divestitures.  In addition, the buyers assumed approximately $77 million of Knight Ridder retirement obligations related to certain newspapers.  Four of the 12 newspapers were sold concurrently with the closing of the Acquisition.  The remaining eight newspapers were owned for periods ranging from two days to 36 days following the closing of the Acquisition.  The operating results of these eight divested newspapers for the periods they were owned by the Company, including interest expense and debt issuance costs related to bank debt incurred until their respective sales, are included in discontinued operations in the Company's consolidated statement of income for the period from June 27, 2006 to December 31, 2006.  No accounting gain or loss was recognized on the sale of the 12 newspapers.

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In July 2006, the Company sold 18.3% of its interest in each of CareerBuilder and ShopLocal, and 13.8% of its interest in Topix for an aggregate of $309.7 million in cash and used the after-tax proceeds to reduce debt.  No accounting gain or loss was recognized on the sale of these investments.  The Company retained a 15.0% interest in each of CareerBuilder and ShopLocal, and an 11.3% interest in Topix.  Effective May 11, 2007, the Company's interest in CareerBuilder declined to 14.4%.

On March 5, 2007, the Company sold the (Minneapolis) Star Tribune newspaper and other publications and websites related to the newspaper to an entity affiliated with Avista Capital Partners for $530.0 million.  The Company expects to receive an income tax refund of approximately $201 million related to the sale in 2008.  This amount has been recorded as a long-term receivable on the consolidated balance sheet.

The results of Star Tribune's operations, including interest on debt incurred to purchase it, have been recorded as discontinued operations in all periods presented. The Company used the proceeds from the sale of the Star Tribune to reduce debt.

Revenues and loss from discontinued operations, net of income taxes, for the three months and six months ended July 1, 2007 and June 25, 2006 were as follows (in thousands):

	Three Months Ended					Six Months Ended
	July 1, 2007			June 25, 2006		July 1, 2007			June 25, 2006
Revenues	$	91		$	92,234	$	52,994		$	179,775
Income (loss) from discontinued operations before income taxes (1)	$	146		$	20,373	$	(4,637	)	$	30,630
Income tax expense (benefit)		(559	)		8,426		141			12,737
Income (loss) from discontinued operations	$	705		$	11,947	$	(4,778	)	$	17,893

(1)   Includes interest expense allocated to discontinued operations of $0 and $1.2 million for the three months and six months ended July 1, 2007, respectively and $1.6 million and $3.7 million for the three months and six months ended June 25, 2006, respectively.

NOTE 3.   INVESTMENTS IN UNCONSOLIDATED COMPANIES

The following is the Company's ownership interest and carrying value of investments in unconsolidated companies and joint ventures (dollars in thousands):

Company	% Ownership Interest		July 1, 2007		December 31, 2006
CareerBuilder		14.4	$	225,992	$	230,506
Seattle Times Company		49.5		89,910		102,228
Classified Ventures		25.6		98,476		98,259
SP Newsprint		33.3		38,543		40,666
Ponderay Newsprint		27.0		24,068		26,162
ShopLocal		15.0		11,147		10,993
Topix		11.3		9,442		9,956
McClatchy Tribune Information Services		50.0		1,102		773
Other	Various			778		670
			$	499,458	$	520,213

The Company primarily uses the equity method of accounting for these investments.

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During the second fiscal quarter of 2007, The Seattle Times Company (“STC”) entered into an agreement to settle certain outstanding legal issues and amend their Joint Operating Agreement relating to STC and The Hearst Corporation ("Hearst") Seattle newspaper. As a result, STC is expected to pay approximately $24 million to Hearst in the third fiscal quarter of 2007.  The Company has expensed $7.8 million as its share of this payment as part of its equity loss in the second fiscal quarter of 2007.

NOTE 4. INTANGIBLE ASSETS AND GOODWILL
Intangible assets and goodwill, along with their weighted-average amortization periods consisted of the following (in thousands):
	July 1, 2007
								Weighted
								Average
	Gross		Accumulated			Net		Amortization
	Amount		Amortization			Amount		Period
Intangible assets subject to amortization:
Advertiser and subscriber lists	$	817,701	$	(177,203	)	$	640,498	14 years
Other		26,261		(10,624	)		15,637	8 years
Total	$	843,962	$	(187,827	)		656,135
Other intangible assets not subject to amortization:
Newspaper mastheads							683,000
Total							1,339,135
Goodwill - net							3,586,969
Total intangible assets and goodwill						$	4,926,104
	December 31, 2006
								Weighted
								Average
	Gross		Accumulated			Net		Amortization
	Amount		Amortization			Amount		Period
Intangible assets subject to amortization:
Advertiser and subscriber lists	$	817,701	$	(148,427	)	$	669,274	14 years
Other		26,161		(9,389	)		16,772	8 years
Total	$	843,862	$	(157,816	)		686,046
Other intangible assets not subject to amortization:
Newspaper mastheads							683,000
Total							1,369,046
Goodwill - net							3,559,828
Total intangible assets and goodwill						$	4,928,874

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The following is a summary of the changes in the identifiable intangible assets and goodwill from December 31, 2006 to July 1, 2007 (in thousands):
	December 31,					Disposals/			Amortization			July 1,
	2006			Additions		Adjustments			Expense			2007
Intangible assets subject to amortization	$	843,862		$	25	$	75		$	-		$	843,962
Accumulated amortization		(157,816	)				(9	)		(30,002	)		(187,827	)
		686,046			25		66			(30,002	)		656,135
Mastheads and other		683,000											683,000
Goodwill - net		3,559,828			27,141								3,586,969
Total	$	4,928,874		$	27,166	$	66		$	(30,002	)	$	4,926,104
(1) Relates primarily to revised estimates of acquired income tax reserves.
Amortization expense for continuing operations was $15.0 million and $1.2 million in the second fiscal quarters of 2007 and 2006, respectively and was $30.0 million and $2.4 million for the first six months of fiscal 2007 and 2006, respectively.
The estimated amortization expense for the remainder of fiscal 2007 and the five succeeding fiscal years is as follows (in thousands):
				Amortization
	Year			Expense
	2007			$	29,948
	2008				59,941
	2009				59,910
	2010				59,232
	2011				57,837
	2012				57,368

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NOTE 5.    LONG-TERM DEBT

As of July 1, 2007 and December 31, 2006, long-term debt consisted of the following (in thousands):

	July 1, 2007		December 31, 2006
Term A bank debt, weighted average interest of 6.11%    at July 1, 2007 and 6.12% at December 31, 2006	$	750,000	$	1,100,000
Revolving bank debt, interest of 6.10%    at July 1, 2007 and 6.10% at December 31, 2006		415,287		665,795
Publicly-traded notes:
$100 million 6.625% debentures due in 2007		100,011		100,025
$200 million 9.875% debentures due in 2009		210,139		212,950
$300 million 7.125% debentures due in 2011		304,005		304,512
$200 million 4.625% debentures due in 2014		174,443		172,705
$400 million 5.750% debentures due in 2017		361,724		359,848
$100 million 7.150% debentures due in 2027		90,940		90,717
$300 million 6.875% debentures due in 2029		270,789		270,117
Total debt		2,677,338		3,276,669
Less current portion		-		530,000
Long term debt	$	2,677,338	$	2,746,669

The publicly-traded notes are stated net of unamortized discounts and premiums resulting from recording such assumed liabilities at fair value as of the June 27, 2006 Acquisition date. The notes due in 2007 are expected to be refinanced on a long-term basis by drawing on the Company's revolving credit facility and accordingly, are included in long-term debt.

Through June 27, 2006, the Company used its senior unsecured revolving credit facility, which provided borrowings of up to $500 million. This credit facility was refinanced with a new $3.2 billion senior unsecured credit facility ("Credit Agreement") entered into in connection with the Acquisition.  At the closing of the Acquisition, the Company’s new Credit Agreement consisted of a $1 billion five-year revolving credit facility and $2.2 billion five-year Term A loan. Both the Term A loan and the revolving credit facility are due on June 27, 2011.

The Company has repaid $600.5 million of bank debt in the first six months of fiscal 2007 from the sale of the Star Tribune newspaper, sales of other assets and cash generated from operations. A total of $529.1 million of funds were available under the revolving credit facility at July 1, 2007.

Debt under the Credit Agreement bears interest at the London Interbank Offered Rate ("LIBOR") plus a spread ranging from 37.5 basis points to 125.0 basis points.  Applicable rates are based upon the Company’s ratings on its long-term debt from Moody’s Investor Services ("Moody’s") and Standard & Poor’s.  A commitment fee for the unused revolving credit ranges from 10.0 basis points to 20.0 basis points depending on the Company’s ratings.  Standard & Poor’s has rated the facility "BB+" and Moody’s has rated the facility “Baa3”.  According to the Credit Agreement, the Company will pay interest at LIBOR plus 75.0 basis points on outstanding debt and its commitment fees are currently at 15.0 basis points.

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The Credit Agreement contains financial covenants including a minimum interest coverage ratio (as defined in the Credit Agreement) of 3.00 to 1.00 through July 1, 2007; 2.75 to 1.00 from September 30, 2007 through September 28, 2008 and 3.00 to 1.00 from December 28, 2008 and thereafter; and a maximum leverage ratio (as defined in the Credit Agreement) of 4.75 to 1.00 through July 1, 2007; 5.00 to 1.00 from September 30, 2007 through March 30, 2008; 4.75 to 1.00 from June 29, 2008 through September 28, 2008; 4.25 to 1.00 from December 28, 2008 to September 27, 2009; and declining to 4.00 to 1.00 on December 27, 2009 and thereafter.  At July 1, 2007, the Company was in compliance with all debt covenants.

 In addition, the Company’s Material Subsidiaries (as defined in the Credit Agreement) have guaranteed the Company’s obligations under the Credit Agreement.  These guarantees were effected on May 4, 2007, and continue in effect upon the earlier of the termination of the Credit Agreement or the date which is one year after the date both ratings agencies have rated the Company’s bank debt as investment grade.

At July 1, 2007, the Company had outstanding letters of credit totaling $55.6 million securing estimated obligations stemming from workers’ compensation claims and other contingent claims.

The following table presents the approximate annual maturities of debt, based upon the Company's required payments (adjusted for management’s expectations regarding the notes due in fiscal 2007 as discussed above), for the next five years and thereafter (in thousands):

Year	Payments
2008	$	-
2009		200,000
2010		-
2011		1,565,287
2012		-
Thereafter		1,000,000
		2,765,287
Less net discount		(87,949	)
Total debt	$	2,677,338

NOTE 6.  EMPLOYEE BENEFITS

The Company sponsors defined benefit pension plans (“retirement plans”), which cover a majority of its employees.  Benefits are based on years of service and compensation.  Contributions to the retirement plans are made by the Company in amounts deemed necessary to provide the required benefits.  The Company made $40.0 million in voluntary contributions to its retirement plans in early fiscal 2006 (including $8.5 million to Star Tribune plans).  No contributions to the Company's retirement plans are currently planned for fiscal 2007.

The Company also has a limited number of supplemental retirement plans to provide key employees with additional retirement benefits.  The terms of the plans are generally the same as those of the retirement plans, except that the supplemental retirement plans are limited to key employees and provide an enhanced pension benefit.  These plans are funded on a pay-as-you-go basis and the accrued pension obligation is largely included in other long-term obligations.

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The elements of pension costs for continuing operations are as follows (in thousands):

	Three Months Ended						Six Months Ended
	July 1, 2007			June 25, 2006			July 1, 2007			June 25, 2006
Service cost	$	10,872		$	4,235		$	18,810		$	8,028
Interest cost		22,772			6,462			46,988			12,258
Expected return on plan assets		(26,024	)		(8,517	)		(54,250	)		(16,268	)
Prior service cost amortization		24			50			105			94
(Gain)/loss amortization		(556	)		2,372			3,453			4,491
Net pension expense	$	7,088		$	4,602		$	15,106		$	8,603

No material contributions were made to the Company's multi-employer plans for continuing operations for the three months and six months ended July 1, 2007 and June 25, 2006.

The Company also provides for or subsidizes post-retirement healthcare and certain life insurance benefits for employees.  The elements of post-retirement benefits for continuing operations are as follows (in thousands):

	Three Months Ended					Six Months Ended
	July 1, 2007			June 25, 2006		July 1, 2007			June 25, 2006
Service cost	$	200		$	1	$	422		$	1
Interest cost		426			97		1,434			106
(Gain)/loss amortization		(6	)		-		(6	)		-
Net post-retirement expense	$	620		$	98	$	1,850		$	107

NOTE 7.  COMMON STOCK AND STOCK PLANS

On June 27, 2006, in connection with the Acquisition, the Company increased the authorized number of its Class A Common shares from 100,000,000 to 200,000,000 shares and issued 34,988,009 new Class A Common shares in connection with the Acquisition (see Note 2).

The Company's Class A and Class B Common 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 current holder of shares of Class B Common Stock of the Company; 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.

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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 outstanding shares of common stock of the Company).  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, the Company has 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.

At July 1, 2007, the Company had six stock-based compensation plans.  The Company applied APB Opinion 25 and related interpretations in accounting for its plans in fiscal 2005 and prior years.  The Company has adopted SFAS No. 123R for its stock plans effective December 26, 2005, the first day of fiscal 2006.

Beginning in fiscal 2005, the Company awarded stock-settled stock appreciation rights ("SARs") in lieu of stock options to its employees.  The SARs were granted at fair market value, have a ten-year term and vest in four equal annual installments beginning on March 1 following the year for which the award was made.

Outstanding options and SARs are summarized as follows:	Options/ SARs			Weighted Average Exercise Price		Aggregate Intrinsic Value (in thousands)
Outstanding December 31, 2006		4,064,075		$	52.78	$	4,857
Granted		37,250			39.45
Exercised		(69,625	)		26.55
Forfeited		(94,250	)		63.74
Expired		(227,000	)		56.57
Outstanding July 1, 2007		3,710,450			52.63	nil
Options and SARs exercisable:
July 1, 2007		2,130,825		$	53.42

As of July 1, 2007, there were $11.4 million of unrecognized compensation costs related to non-vested stock-based compensation arrangements granted under the Company's plans.  The cost is expected to be recognized over a weighted average period of 1.9 years.

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The following tables summarize information about stock options and SARs outstanding in the stock plans at July 1, 2007:
Range of Exercise Prices		Options/ SARs Outstanding		Average Remaining Contractual Life		Weighted Average Exercise Price		Options/ SARs Exercisable		Weighted Average Exercise Price
$	26.19 - $42.50		1,486,625		6.79	$	40.81		590,625	$	38.44
$	45.98 - $59.09		1,253,200		6.34	$	54.37		892,825	$	52.86
$	59.58 - $73.36		970,625		6.82	$	68.49		647,375	$	67.86
$	26.19 - $73.36		3,710,450		6.65	$	52.63		2,130,825	$	53.42

The weighted average remaining contractual life on options exercisable at July 1, 2007 was 5.1 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.  Expected volatility was based on historical volatility for a period equal to the stock option's expected life for shares granted in the second fiscal quarters of 2007 and 2006, and for a one-year look back period for shares granted prior to fiscal 2006. 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.

	Six Months Ended
	July 1, 2007			June 25, 2006
Dividend yield		1.96			1.57
Expected life in years		5.41			5.27
Volatility		.19			.19
Risk-free interest rate		4.74	%		5.00	%
Weighted average fair value of options/SARs granted	$	8.40		$	11.01

The Company also offers eligible employees the option to purchase common stock under its ESPP.  The expense associated with the plan is 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 ESPP is included in the stock-related compensation discussed in Note 1.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The McClatchy Company (the "Company") is the third largest newspaper company in the United States, with 31 daily newspapers and approximately 50 non-dailies. Twenty of its daily newspapers were acquired on June 27, 2006 in the Knight Ridder acquisition (the "Acquisition") – see Note 2 to the consolidated financial statements.  McClatchy also operates leading local websites and direct marketing operations in each of its markets which complement its newspapers and extend its audience reach in each market.  McClatchy-owned newspapers include The Miami Herald, The Sacramento Bee, the (Fort Worth) Star-Telegram, The Kansas City Star, The Charlotte Observer, and The (Raleigh) News & Observer.

McClatchy also has a portfolio of premium digital assets. Its leading local websites offer users information, comprehensive news, advertising, e-commerce and other services.  The Company owns and operates McClatchy Interactive, an interactive operation that provides websites with content, publishing tools and software development.  McClatchy operates Real Cities, the largest national advertising network of local news websites and owns 14.4% of CareerBuilder, the nation’s largest online job site.  McClatchy also owns 25.6% of Classified Ventures, a newspaper industry partnership that offers classified websites such as the nation’s number two online auto website, cars.com, and the number one rental site, apartments.com.

The Company's primary source of revenue is advertising, which accounts for roughly 84% of the Company's revenue.  While percentages vary from year to year and from newspaper to newspaper, retail advertising carried as a part of newspapers ("run-of-press" or "ROP" advertising) or in advertising inserts placed in newspapers (preprint advertising) generally contributes roughly 37% of advertising revenues at the Company's newspapers.  Recent trends have been for certain national or regional retailers to use greater preprint and online advertising and less ROP advertising, although that trend shifts from time to time.  Nonetheless, ROP advertising still makes up the majority of retail advertising.  Classified advertising (including online classified advertising), primarily in automotive, employment and real estate categories, generally contributes about 33% of advertising revenue and national advertising generally contributes about 8% of total advertising revenue.  Direct marketing and other advertising make up the remainder of the Company's advertising revenues.  Circulation revenues contribute roughly 12% of the Company's newspaper revenues.  Most newspapers are delivered by independent contractors.  Circulation revenues are recorded net of direct delivery costs.

See the following "Results of Operations" for a discussion of the Company's revenue performance and contribution by category for the three months and six months ended July 1, 2007 and June 25, 2006.

Critical Accounting Policies

Critical accounting policies are those accounting policies that management believes are important to the portrayal of the Company's financial condition and results and require management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.  The Company's 2006 Annual Report on Form 10-K includes a description of certain critical accounting policies, including those with respect to revenue recognition, allowance for uncollectible accounts, acquisition accounting, goodwill and intangible impairment, discontinued operations, pension and post-retirement benefits, income taxes, insurance and stock-based employee compensation.

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Income Tax Contingencies:

The Company is subject to periodic audits by the Internal Revenue Service and other state and local taxing authorities.  These audits may challenge certain aspects of the Company's tax positions such as the timing and amount of deductions and allocation of taxable income to the various tax jurisdictions.  Income tax contingencies are accounted for in accordance with FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"), and may require significant management judgment in estimating final outcomes.  Actual results could materially differ from these estimates and could significantly affect the effective tax rate and cash flows in future periods.

Recent Events and Trends

Acquisition Transaction:

On June 27, 2006 (the second day of the Company’s third fiscal quarter), the Company completed the purchase of Knight-Ridder, Inc. ("Knight Ridder") pursuant to a definitive merger agreement entered into on March 12, 2006, under which the Company paid Knight Ridder shareholders a per share price consisting of $40.00 in cash and .5118 of a Class A McClatchy common share (the "Acquisition").  The Company issued approximately 35 million Class A common shares in connection with the Acquisition.  The total purchase price was approximately $4.6 billion.  In addition, the Company assumed $1.9 billion of Knight Ridder's long-term debt at the closing of the Acquisition.

Prior to the Acquisition, Knight Ridder published 32 daily newspapers in 29 U.S. markets, operated websites in all of its markets and owned a variety of internet and other investments which consisted of:  33.3% of each of CareerBuilder LLC ("CareerBuilder") and ShopLocal LLC ("ShopLocal"), 25.0% of Topix.net ("Topix"), 21.5% of Classified Ventures LLC ("Classified Ventures"), 33.3% interest in SP Newsprint Company ("SP"), 13.5% interest in the Ponderay Newsprint Company ("Ponderay") and 49.5% of The Seattle Times Company which owns The Seattle Times newspaper and weekly newspapers in the Puget Sound area, and daily newspapers located in Walla Walla and Yakima, Washington and in Portland, Maine and various other smaller investments.  Knight Ridder was the founder and operator of Real Cities,the largest national advertising network of local news websites.

To consummate the Acquisition, the Company borrowed $3.076 billion under a new bank debt facility (see Note 5 to the consolidated financial statements) and used the proceeds from the sales of four Knight Ridder newspapers (see Disposition Transactions below) in order to pay Knight Ridder shareholders ($2.7 billion) and refinance its and Knight Ridder's bank debt ($498.0 million).  The after-tax proceeds from the sales of the eight Knight Ridder newspapers sold after the Acquisition closed were used to reduce debt.

The Acquisition was accounted for as a purchase.  The purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the June 27, 2006 Acquisition date.  The purchase price allocation was primarily based upon an independent valuation.  The purchase price allocation, while substantially completed, is subject to further adjustments based upon completion of analyses of deferred income tax assets and liabilities.

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Disposition Transactions:

In conjunction with the Acquisition, the Company divested 12 Knight Ridder newspapers for strategic and antitrust reasons.  The divested newspapers were the Philadelphia Inquirer;Philadelphia Daily News;San Jose Mercury News; St. Paul Pioneer Press; Akron Beacon Journal (OH); Wilkes Barre Times Leader (PA); Aberdeen American News (SD); Grand Forks Herald (ND); Ft. Wayne News-Sentinel (IN); Contra Costa Times (CA); Monterey Herald (CA); and Duluth News Tribune (MN).  The Company received cash proceeds of approximately $2.0 billion (net of transaction costs) from these divestitures.  In addition, the buyers assumed approximately $77 million of Knight Ridder retirement obligations related to certain newspapers.  Four of the 12 newspapers were sold concurrently with the closing of the Acquisition.  The remaining eight newspapers were owned for periods ranging from two days to 36 days following the closing of the Acquisition.  The operating results of these eight divested newspapers for the periods they were owned by the Company, including interest expense and debt issuance costs related to bank debt incurred until their respective sales, are included in discontinued operations in the Company's consolidated statement of income for 2006.  No accounting gain or loss was recognized on the sale of the 12 newspapers.

In July 2006, the Company sold 18.3% of its interest in each of CareerBuilder and ShopLocal, and 13.8% of its interest in Topix for an aggregate of $309.7 million in cash and used the after-tax proceeds to reduce debt.  No accounting gain or loss was recognized on the sale of these investments. The Company retained a 15.0% interest in each of CareerBuilder and ShopLocal and an 11.3% interest in Topix.  Effective May 11, 2007, the Company's interest in CareerBuilder declined to 14.4%.

On March 5, 2007, the Company sold the (Minneapolis) Star Tribune and other publications and websites related to the newspaper to an entity affiliated with Avista Capital Partners for $530.0 million.  The Company expects to receive an income tax refund of approximately $201 million related to the sale in 2008.  This amount has been recorded as a long-term receivable on the consolidated balance sheet.

The results of Star Tribune's operations, including interest on debt incurred to purchase it, have been recorded as discontinued operations in all periods presented. The Company used the proceeds from the sale of the Star Tribune to reduce debt.

Advertising Revenues:

Classified advertising revenues have continued to decline since the third fiscal quarter of 2006 and advertising results declined across the board in the second fiscal quarter of 2007, but particularly in real estate advertising.  Real estate advertising began to weaken in the fourth fiscal quarter of 2006 and has declined substantially since then.  The Company has seen significant declines in California and Florida, where real estate values and thus advertising were strong in the second fiscal quarter of 2006 (see discussion below).  The decline in automotive classified advertising reflected an industry-wide decline that began in 2004, while employment advertising has been in decline in most markets since the third fiscal quarter of 2006.  National advertising also declined in the second fiscal quarter of 2007 reflecting a slowdown in a number of segments including telecommunications, national automotive and financial advertising, an industry-wide trend.

A total of 68.5% of the Company's advertising declines in the second fiscal quarter of 2007 came from California and Florida, two regions that benefited strongly from the real estate boom, and are likewise being hurt in the subsequent real estate slowdown. Advertising revenues were down 17.8% in the second fiscal quarter of 2007. The housing sector is an important component of these states’ economies. Hence, California and Florida also account for a majority of the decline in auto and employment advertising, as the real estate downturn is having an impact on these categories as well. These states have experienced similar advertising downturn and recovery cycles in the past, and were recently the Company’s best performing regions. Management believes a significant portion of the current advertising downturn reflects these cyclical forces and expects declines to continue in 2007 because of the difficult trends in these states. See the revenue discussions in management’s review of “Results of Operations”.

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Newsprint:

Newsprint prices continued to decline in the second fiscal quarter of 2007 after a sustained period of increasing prices from 2002 through early 2006.  Through the first six months of fiscal 2007, newsprint expense was 13.8% lower than pro forma newsprint expense (which includes the 20 Knight Ridder Newspapers) in the first six months of 2006, primarily reflecting lower newsprint usage and, to a lesser degree, lower newsprint prices.  Newsprint pricing is dependent on global demand and supply for newsprint.  Significant changes in newsprint prices can increase or decrease the Company's operating expenses.  However, because the Company has ownership interests in newsprint producers (Ponderay and SP), the recent trend of falling newsprint prices, while favorably affecting operating expenses, is contributing to equity losses from these investments.  Ponderay and SP are also currently impacted by the higher cost of energy and fiber used in the papermaking process.  The impact of newsprint price increases on the Company's financial results is discussed under "Results of Operations".

As a result of the recently announced strategic alternative review at SP, the Company and its partners are seeking to sell SP.  The ultimate outcome of the strategic review cannot be determined and the timing of a transaction, if any, which the Company and its partners may undertake has not been determined.

RESULTS OF OPERATIONS

The Company noted the following items related to the Acquisition and other matters that impacted second fiscal quarter of 2007 and year-to-date fiscal 2007 results:

·   On June 26, 2006, the Company issued approximately 35 million Class A shares in connection with the Acquisition. As a result, the weighted average diluted shares used to calculate earnings per share in the second fiscal quarter of 2007 increased to approximately 82 million shares compared to approximately 47 million shares in second fiscal quarter of 2006.

·   The purchase price for the Acquisition has been allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of June 27, 2006, the date of the Acquisition. The purchase price allocation, while substantially complete, is subject to further adjustments based upon completion of analyses of deferred income tax assets and liabilities.

·   On March 5, 2007, the Company sold the (Minneapolis) Star Tribune newspaper for $530.0 million in proceeds and is expected to receive a tax refund of approximately $201 million related to the sale in 2008.  The results of Star Tribune's operations have been recorded as discontinued operations in all periods presented.

·   During the second fiscal quarter of 2007, STC and Hearst entered into an agreement to settle certain outstanding legal issues and amend their Joint Operating Agreement relating to STC and Hearst's Seattle newspaper. As a result, STC is expected to pay approximately $24 million to Hearst in the third fiscal quarter of 2007.  The Company has expensed $7.8 million as its share of this payment as part of its equity loss in the second fiscal quarter of 2007.

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The Company's results from continuing operations since the close of the Acquisition (and all pro forma amounts for prior periods discussed) include the operations of the 20 retained former Knight Ridder newspapers and all of the Company's previously owned newspaper operations except for the (Minneapolis) Star Tribune newspaper.

The growth in revenues and expenses in the second fiscal quarter of 2007 compared to the same period in 2006 resulted from the Acquisition. To facilitate an analysis of operating results, the comparative analysis between the three months and six months ended July 1, 2007 and June 25, 2006 discussed below is supplemented by a comparison to 2006 pro forma results from continuing operations.  Pro forma amounts reflect the results of continuing operations of the Company as defined in the preceding paragraph.  The financial results for Knight Ridder and the 20 newspapers retained by the Company included in the pro forma information were derived from the historical unaudited financial statements of Knight Ridder. The Company believes that the use of pro forma reporting of operating results enhances measurement of performance by permitting comparisons with prior historical data.  Such supplemental pro forma data is not necessarily indicative of the operating results that would have occurred if the Acquisition had been completed as of the beginning of fiscal 2006.

Second Fiscal Quarter of 2007 Compared to Second Fiscal Quarter of 2006

The Company reported income from continuing operations of $34.5 million or $0.42 per share in the second fiscal quarter of 2007, compared to $32.2 million or $0.69 per share in the second fiscal quarter of 2006.  The Company recorded income from discontinued operations of $0.7 million or $0.01 per share relating to the results of the (Minneapolis) Star Tribune.  The Company’s total net income was $35.2 million or $0.43 per share including discontinued operations in the second fiscal quarter of 2007, compared to net income of $44.1 million or $0.94 per share in the second fiscal quarter of 2006.

            Revenues:

Revenues in the second fiscal quarter of 2007 were $580.0 million, up $368.0 million or 173.6% from the second fiscal quarter of 2006 revenues of $212.0 million, due to the addition of the 20 former Knight Ridder newspapers and the sale of the (Minneapolis) Star Tribune.  Advertising revenues totaled $488.3 million and circulation revenues were $69.7 million.  On a pro forma basis, revenues decreased $52.4 million or 8.3% from the second fiscal quarter of 2006 with advertising revenues decreasing $53.1 million or 9.8% and circulation revenues decreasing $3.4 million or 4.6% from the second fiscal quarter of 2006.

As discussed in Recent Events and Trends above, 68.5% of the Company's advertising declines in the second fiscal quarter of 2007 came from California and Florida, two regions that benefited strongly from the real estate boom, and are likewise being hurt in the subsequent real estate slowdown. Advertising revenues were down 17.8% in these two regions in the second fiscal quarter. The housing sector is an important component of these states’ economies. Hence, California and Florida also account for a majority of the decline in auto and employment advertising, as the real estate downturn is having an impact on these categories as well.  

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The following summarizes the Company's revenue by category on a pro forma basis, which compares second fiscal quarter of 2007 with second fiscal quarter of 2006 (dollars in thousands):

	As Reported						Pro Forma
	July 1, 2007		June 25, 2006		% Change		June 25, 2006		% Change
Advertising:
Retail	$	213,203	$	74,971		184.4	$	227,220		(6.2	)
National		46,064		15,394		199.2		50,821		(9.4	)
Classified:
Auto		43,760		18,085		142.0		51,729		(15.4	)
Employment		66,236		25,954		155.2		78,363		(15.5	)
Real estate		54,687		28,916		89.1		67,492		(19.0	)
Other		23,120		6,480		256.8		23,085		0.2
Total classified		187,803		79,435		136.4		220,669		(14.9	)
Direct marketing
and other		41,207		13,883		196.8		42,658		(3.4	)
Total advertising		488,277		183,683		165.8		541,368		(9.8	)
Circulation		69,707		23,504		196.6		73,087		(4.6	)
Other		22,043		4,813		358.0		17,978		22.6
Total revenues	$	580,027	$	212,000		173.6	$	632,433		(8.3	)

Retail advertising increased $138.2 million or 184.4% from the second fiscal quarter of 2006 reflecting the Acquisition.  On a pro forma basis, retail advertising decreased $14.0 million or 6.2% from the second fiscal quarter of 2006.  On a pro forma basis, online retail advertising increased $2.4 million or 59.8% from the second fiscal quarter of 2006, while print ROP advertising decreased $14.5 million or 10.3% from the second fiscal quarter of 2006.  On a pro forma basis, preprint advertising decreased $1.9 million or 2.3% from the second fiscal quarter of 2006.

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National advertising increased $30.7 million or 199.2% from the second fiscal quarter of 2006 reflecting the Acquisition.  On a pro forma basis, national advertising decreased $4.8 million or 9.4% from the second fiscal quarter of 2006.  The declines in total national advertising were primarily in the telecommunications, national automotive and financial advertising categories, reflecting an industry-wide trend.  Online national advertising increased $1.7 million from the second fiscal quarter of 2006 and decreased $0.6 million on a pro forma basis.

Classified advertising increased $108.4 million or 136.4% from the second fiscal quarter of 2006 reflecting the Acquisition.  On a pro forma basis, classified advertising decreased $32.9 million or 14.9% from the second fiscal quarter of 2006.  Online classified advertising increased $25.1 million or 267.0% from the second fiscal quarter of 2006.  On a pro forma basis, online classified advertising decreased $2.8 million or 7.6% from the second fiscal quarter of 2006.

·   Real estate advertising was up $25.8 million or 89.1% from the second fiscal quarter of 2006. On a pro forma basis, real estate advertising decreased $12.8 million or 19.0% from the second fiscal quarter of 2006.  The Company has seen dramatic declines in California and Florida, where real estate values, and  thus advertising, were exceptionally strong in 2006.  The Company expects declines in this revenue category to continue because of the difficult trends in these states.

·   Automotive advertising increased $25.7 million or 142.0% from the second fiscal quarter of 2006.  On a pro forma basis, automotive advertising declined $8.0 million or 15.4% from the second fiscal quarter of 2006, reflecting an industry-wide trend.  Print advertising declined 18.7%, while online advertising grew 12.9% reflecting the strength of the Company's cars.com online products.

·   Employment advertising increased $40.3 million or 155.2% from the second fiscal quarter of 2006.  On a pro forma basis, employment advertising decreased $12.1 million or 15.5% from the second fiscal quarter of 2006.  Print employment advertising declined 17.0% while online employment advertising declined 12.4%. Online employment advertising was affected by the current affiliate agreement with CareerBuilder, the Company’s online employment advertising partner.  This agreement is helping to grow online employment revenues at the legacy McClatchy newspapers.  However, under the current affiliate agreement selected products are no longer available to be sold by the 20 acquired Knight Ridder newspapers, which are reducing their internet revenues.

Online advertising, which is included in each of the advertising categories discussed above, totaled $42.8 million in the second fiscal quarter of 2007, an increase of $31.2 million or 269.4% over the second fiscal quarter of 2006.  On a pro forma basis, online advertising decreased $1.0 million or 2.2% from the second fiscal quarter of 2006 and was held down by the current CareerBuilder affiliate agreement's impact on employment advertising as discussed above.

Direct marketing revenues increased $27.1 million or 202.0% from the second fiscal quarter of 2006 reflecting the Acquisition.  On a pro forma basis, direct marketing revenues decreased $1.7 million or 3.9% from the second fiscal quarter of 2006 reflecting the overall slow advertising environment. The Company extends its newspaper franchises by supplementing the mass reach of the newspaper with direct marketing and direct mail products so that advertisers can both achieve broad appeal and capture targeted audiences with one-stop shopping.

Circulation revenues increased $46.2 million or 196.6% from the second fiscal quarter of 2006 reflecting the Acquisition.  On a pro forma basis, consolidated circulation revenues decreased $3.4 million or 4.6% from the second fiscal quarter of 2006, primarily reflecting lower circulation volumes.  The Company continues to reduce third-party and outlying circulation that is not highly valued by its newspaper advertisers, and expects circulation volumes to remain lower in fiscal 2007 compared to fiscal 2006.

Operating Expenses:

Operating expenses increased $302.9 million or 189.6% in the second fiscal quarter of 2007 related to expenses added by the Acquisition.  On a pro forma basis, operating expenses were down $57.5 million or 11.1% from the second fiscal quarter of 2006, as the Company continued to reduce costs and realized synergies from the Acquisition.  On a pro forma basis, compensation costs were down 12.5%, with payroll down 12.4%, and a 6.9% reduction in staffing.  On a pro forma basis, fringe benefits were down 13.2%.  On a pro forma basis, newsprint and supplement expense was down 17.0% with newsprint expense down 17.4% and supplement expense down 14.3%.  On a pro forma basis, other operating costs were down 8.5%, reflecting lower bad debt and professional services.  Professional services in the second fiscal quarter of 2006 included $4.7 million of strategic alternative review services incurred and recorded by Knight Ridder.  On a pro forma basis, depreciation and amortization expense increased by 4.3% due primarily to the purchase price accounting related to the Acquisition.

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Interest:

Interest expense for continuing operations was $49.6 million for the second fiscal quarter of 2007 primarily reflecting the service costs on debt incurred to finance the Acquisition.  Interest expense also included $1.7 million related to accrued interest on the liability for unrecognized tax benefits.  The Company’s effective interest rate in the second fiscal quarter of 2007 was approximately 6.4%.

Equity Income (Loss):

Loss from unconsolidated companies resulted primarily from operating results of the Company's newsprint investments and STC (see Note 3 to the consolidated financial statements).

Income Taxes:

The income tax rate from continuing operations in the second fiscal quarter of 2007 was 39.9%, compared to 39.0% in the second fiscal quarter of 2006.  The effective tax rate for the current fiscal year is expected to be in the 39.5% to 40.0% range, but the tax rate is preliminary and may change when the purchase price allocation and related deferred taxes are finalized.

Discontinued Operations:

Income from discontinued operations, (related to the (Minneapolis) Star Tribune newspaper -- see Note 2 to the consolidated financial statements) in the second fiscal quarter of 2007 was $0.7 million or $0.01 per share. Income from discontinued operations was $11.9 million or $0.25 per share in the second fiscal quarter of 2006.  Additionally, $2.1 million in interest incurred on the debt used to finance the purchase of the Star Tribune was recorded in discontinued operations in the second fiscal quarter of 2006.

First Six Months of Fiscal 2007 Compared to First Six Months of Fiscal 2006

The Company reported income from continuing operations of $49.0 million or $0.60 per share in the first six months of fiscal 2006, compared to $54.0 million or $1.15 per share in the first six months of fiscal 2006.  The Company recorded a loss from discontinued operations in the first six months of fiscal 2007 of $4.8 million or $0.06 per share relating to the results of the (Minneapolis) Star Tribune newspaper.  The Company's net income was $44.3 million or $0.54 per share including discontinued operations in the first six months of fiscal 2007 compared to $71.9 million or $1.53 per share in the first six months of fiscal 2006.  Revenues and expenses in the six-month period were generally affected by the trends discussed in the quarterly comparison above, with exceptions noted below.

Revenues:

Revenues from continuing operations in the first six months of fiscal 2007 were $1.147 billion, up $740.1 million or 182.1% from the first six months of fiscal 2006 revenues from continuing operations of $406.5 million, due to the 20 former Knight Ridder newspapers and the sale of the (Minneapolis) Star Tribune.  Advertising revenues were $965.3 million and circulation revenues were $141.6 million in the first six months of fiscal 2007.  On a pro forma basis, revenues decreased $82.1 million or 6.7% from the first six months of fiscal 2006 with advertising revenues decreasing $79.8 million or 7.6% and circulation revenues decreasing $6.1 million or 4.1% from the first six months of fiscal 2006.

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A total of 72.1% of the Company's advertising declines in the first six months of fiscal 2007 came from California and Florida, two regions that benefited strongly from the real estate boom, and are likewise being hurt in the subsequent real estate slowdown. Advertising revenues were down 14.4% in these two regions in the first six months of fiscal 2007. The housing sector is an important component of these states’ economies. Hence, California and Florida also account for a majority of the decline in auto and employment advertising, as the real estate downturn is having an impact on these categories as well.  

The following table summarizes the Company's revenues by category on a pro forma basis, which compares the first six months of fiscal 2007 with the first six months of fiscal 2006 (dollars in thousands):

	As Reported						Pro Forma
	Year to Date						Year to Date
	July 1, 2007		June 25, 2006		% Change		June 25, 2006		% Change
Advertising:
Retail	$	419,231	$	139,659		200.2	$	431,565		(2.9	)
National		91,214		29,152		212.9		101,220		(9.9	)
Classified:
Auto		85,895		36,585		134.8		101,950		(15.7	)
Employment		135,882		51,082		166.0		154,076		(11.8	)
Real estate		109,837		55,379		98.3		131,706		(16.6	)
Other		44,725		12,672		252.9		44,613		0.3
Total classified		376,339		155,718		141.7		432,345		(13.0	)
Direct marketing
and other		78,516		25,488		208.1		80,011		(1.9	)
Total advertising		965,300		350,017		175.8		1,045,141		(7.6	)
Circulation		141,587		47,268		199.5		147,672		(4.1	)
Other		39,698		9,178		332.5		35,915		10.5
Total revenues	$	1,146,585	$	406,463		182.1	$	1,228,728		(6.7	)

Retail advertising increased $279.6 million or 200.2% from the first six months of fiscal 2007 from the first six months of fiscal 2006 reflecting the Acquisition.  On a pro forma basis, retail advertising decreased $12.3 million or 2.9% from the first six months of fiscal 2006.  On a pro forma basis, online retail advertising increased $5.2 million or 70.9% from the first six months of fiscal 2006, while ROP advertising decreased $17.6 million or 6.7% from the first six months of fiscal 2006.  On a pro forma basis, preprint advertising increased $0.1 million or 0.1% from the first six months of fiscal 2006.

National advertising increased $62.1 million or 212.9% from the first six months of fiscal 2006 reflecting the Acquisition.  On a pro forma basis, national advertising decreased $10.0 million or 9.9% from the first six months of fiscal 2006.  The declines reflect the same conditions discussed in the quarterly results.  Online national advertising increased $3.1 million from the first six months of fiscal 2006 and decreased $1.4 million on a pro forma basis.

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Classified advertising increased $220.6 million or 141.7% from the first six months of fiscal 2006 reflecting the Acquisition.  On a pro forma basis, classified advertising decreased $56.0 million or 13.0% from the first six months of fiscal 2006.   Print classified advertising declined 14.8% on a pro forma basis, while online classified advertising was down 3.6% on a pro forma basis in the first six months of fiscal 2007.

·   Real estate advertising was up $54.5 million or 98.3% from the first six months of fiscal 2006. On a pro forma basis, real estate advertising decreased $21.9 million or 16.6% from the first six months of fiscal 2006 as discussed in the quarterly review above.

·   Automotive advertising increased $49.3 million or 134.8% from the first six months of fiscal 2006.   On a pro forma basis, automotive advertising declined $16.1 million or 15.7% from the first six months of fiscal 2006, reflecting an industry-wide trend.  As in the quarterly discussion above, growth in online automotive advertising revenue was offset by declines in print advertising.

·   Employment advertising increased $84.8 million or 166.0% from the first six months of fiscal 2006.  On a pro forma basis, employment advertising decreased $18.2 million or 11.8% from the first six months of fiscal 2006, partially reflecting the effect of the current CareerBuilder affiliate agreement discussed above.

Online advertising, which is included in each of the advertising categories discussed above, totaled $84.0 million in the first six months of fiscal 2007, an increase of $61.9 million or 280.3% over the first six months of fiscal 2006 reflecting the Acquisition.  On a pro forma basis, online advertising increased $1.1 million or 1.4% from the first six months of fiscal 2006, reflecting growth in retail and automotive advertising, which was partially offset by employment advertising and to a lesser degree, real estate declines.

Direct marketing revenues increased $53.0 million or 216.1% from the first six months of fiscal 2006 reflecting the Acquisition.  On a pro forma basis, direct marketing revenues decreased $1.6 million or 2.0% from the first six months of fiscal 2006. The Company extends its newspaper franchises by supplementing the mass reach of the newspaper with direct marketing and direct mail products so that advertisers can both achieve broad appeal and capture targeted audiences with one-stop shopping.

Circulation revenues increased $94.3 million or 199.5% from the first six months of fiscal 2006 reflecting the Acquisition.  On a pro forma basis, circulation revenues decreased $6.1 million or 4.1% from the first six months of fiscal 2006.

Operating Expenses:

Operating expenses increased $622.9 million or 195.3% in the six months of fiscal 2007 related to expenses added by the Acquisition.  On a pro forma basis, operating expenses were down $86.6 million or 8.4% from the first six months of fiscal 2006, as the Company continued to reduce costs and realized synergies from the Acquisition.  On a pro forma basis, compensation costs were down 10.6%, with payroll down 10.6%, and a 6.2% reduction in staffing.  On a pro forma basis, fringe benefits were down 10.8%.  On a pro forma basis, newsprint and supplement expense was down 13.8% with newsprint expense down 12.8% and supplement expense down 19.2%.  On a pro forma basis, other operating costs were down 3.7%, reflecting lower professional services. Professional services in the first half of fiscal 2006 include $8.5 million of alternative strategic review services incurred and recorded by Knight Ridder.  On a pro forma basis, depreciation and amortization expense increased by 3.0% due primarily to the purchase price accounting related to the Acquisition.

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Interest:

Interest expense for continuing operations was $103.3 million for the first six months of fiscal 2007 primarily reflecting the service costs on debt incurred to finance the Acquisition.  While the Company used the proceeds of the (Minneapolis) Star Tribune newspaper sale to reduce debt, it carried interest on this debt for the first two months of the year, which equated to about $5.7 million in interest expense included in continuing operations. Interest expense also included $3.0 million related to accrued interest on the liability for unrecognized tax benefits. Excluding these two items, the Company’s interest expense was $94.6 million.  The Company’s effective interest rate in the first six months of fiscal 2007 was approximately 6.4%.  In the first six months of fiscal 2007, a total of $1.2 million of interest expense was allocated to discontinued operations related to debt used to acquire the (Minneapolis) Star Tribune newspaper, which was sold on March 5, 2007.

Equity Income (Loss):

Loss from unconsolidated companies resulted primarily from the operating results of the Company's newsprint investments and to a lesser extent from the Company's investment in internet-related companies and STC (see Note 3 to the consolidated financial statements).

Income Taxes:

The income tax rate from continuing operations in the first six months of fiscal 2007 was 39.7%, compared to 39.0% in the first six months of fiscal 2006.  The effective tax rate for the current fiscal year is expected to be in the 39.5% to 40.0% range, but the tax rate is preliminary and may change when the purchase price allocation and related deferred taxes are finalized.

        Discontinued Operations:

Loss from discontinued operations, (related to the (Minneapolis) Star Tribune newspaper, see Note 2 to the consolidated financial statements) in the first six months of fiscal 2007 was $4.8 million or $0.06 per share. Income from discontinued operations was $17.9 million or $0.38 per share in the first six months of fiscal 2006.  Additionally, $1.2 million and $3.7 million in interest incurred on the debt used to finance the purchase of the Star Tribune was recorded in discontinued operations in the first six months of fiscal 2007 and fiscal 2006, respectively.

LIQUIDITY AND CAPITAL RESOURCES

        Sources and Uses of Liquidity and Capital Resources:

The Company’s cash and cash equivalents were $25.3 million as of July 1, 2007.  The Company generated $121.5 million of cash from operating activities in the first six months of fiscal 2007.  The increase in cash from operating activities in the first six months of fiscal 2007 resulted primarily from the Acquisition.

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The Company generated $508.3 million of cash from investing activities largely from the $522.9 million proceeds (net of expenses) from the sale of the (Minneapolis) Star Tribune newspaper (see Note 2 to the consolidated financial statements) in the first six months of fiscal 2007 and the sale of equipment totaling $19.4 million.  These sources of funds were offset by $28.3 million purchases of property, plant and equipment.

The Company used $624.1 million of cash from financing sources in the first six months of 2007, primarily for repayment of bank debt.  Of the $624.1 million, the Company repaid $600.5 million of debt in the first six months of fiscal 2007.  The Company paid $29.5 million in dividends in the first six months of fiscal 2007 and also received $5.7 million in proceeds from issuing Class A stock under employee stock plans in the first six months of fiscal 2007.

At July 1, 2007, the Company had $212.0 million of land and other assets held for sale. The Company expects to sell its Miami land in 2008 (included in long-term assets) and its San Jose land in the third fiscal quarter of 2007 (included in current assets). Gross proceeds (before transaction costs) from those sales are expected to be $190.0 million and $25.0 million, respectively.  At July 1, 2007, the Company also had an income tax receivable of $201.0 million which it expects to receive in fiscal 2008 related to the sale of the Star Tribune (see Note 2 to the consolidated financial statements).

As a result of the recently announced strategic alternative review at SP, the Company and its partners are seeking to sell SP. The ultimate outcome of the strategic review cannot be determined and the timing of a transaction, if any, which the Company and its partners may undertake has not been determined.

Debt and Related Matters:

 Through June 27, 2006, the Company used its senior unsecured revolving credit facility, which provided borrowings of up to $500 million. This credit agreement was refinanced with a new $3.2 billion senior unsecured credit facility ("Credit Agreement") entered into in connection with the Acquisition.  At closing, the Company’s new Credit Agreement consisted of a $1 billion five-year revolving credit facility and $2.2 billion five-year Term A loan. Both the Term A loan and the revolver are due on June 27, 2011.

On June 27, 2006, McClatchy borrowed $2.2 billion under the Term A loan and $876.0 million under the revolving credit facility.  The Company has subsequently repaid $1.45 billion of the Term A loan and $460.7 million of the revolving credit facility, primarily from proceeds received in the sale of the eight former Knight Ridder newspapers, net of income taxes paid on the tax gain on the sale (see Note 2 to the consolidated financial statements), proceeds generated from asset sales and cash generated by operations in fiscal 2007 as discussed above.  A total of $529.1 million of funds were available under the revolving credit facility at July 1, 2007.

Debt under the Credit Agreement bears interest at the London Interbank Offered Rate ("LIBOR") plus a spread ranging from 37.5 basis points to 125.0 basis points.  Applicable rates are based upon the Company’s ratings on its long-term debt from Moody’s Investor Services ("Moody’s") and Standard & Poor’s.  A commitment fee for the unused revolving credit ranges from 10.0 basis points to 20.0 basis points depending on the Company’s ratings.  Standard & Poor’s has rated the facility "BB+" and Moody’s has rated the facility “Baa3”.  According to the Credit Agreement, the Company will pay interest at LIBOR plus 75.0 basis points on outstanding debt and its commitment fees are currently at 15.0 basis points.

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The Credit Agreement contains financial covenants including a minimum interest coverage ratio (as defined in the Credit Agreement) of 3.00 to 1.00 through July 1, 2007; 2.75 to 1.00 from September 30, 2007 through September 28, 2008 and 3.00 to 1.00 from December 28, 2008 and thereafter; and a maximum leverage ratio (as defined in the Credit Agreement) of 4.75 to 1.00 through July 1, 2007; 5.00 to 1.00 from September 30, 2007 through March 30, 2008; 4.75 to 1.00 from June 29, 2008 through September 28, 2008; 4.25 to 1.00 from December 28, 2008 to September 27, 2009; and declining to 4.00 to 1.00 on December 27, 2009 and thereafter.  At July 1, 2007, the Company was in compliance with all debt covenants.

 In addition, the Company’s Material Subsidiaries (as defined in the Credit Agreement) have guaranteed the Company’s obligations under the Credit Agreement.  These guarantees were effected on May 4, 2007, and continue in effect upon the earlier of the termination of the Credit Agreement or the date which is one year after the date both ratings agencies have rated the Company’s bank debt as investment grade.

At July 1, 2007, the Company had outstanding letters of credit totaling $55.6 million securing estimated obligations stemming from workers’ compensation claims and other contingent claims.

Contractual Obligations:

As of July 1, 2007, the Company has purchase obligations primarily related to capital expenditures for property, plant and equipment expiring at various dates through 2008, totaling approximately $16.4 million.

Significant changes in the Company's contractual obligations since year-end 2006 include the reduction of current-portion of long-term debt of $530.0 million (see Note 2 to the consolidated financial statements) and an increase of $25.7 million in income tax reserves through July 1, 2007, of which $25.2 million related to the adoption of FIN 48 (see Note 1 to the consolidated financial statements).

        ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Debt under the Credit Agreement bears interest at the LIBOR plus a spread ranging from 37.5 basis points to 125.0 basis points.  Applicable rates are based upon the Company's ratings on its long-term debt from Moody's and Standard & Poor's.  A hypothetical 25 basis point change in LIBOR for a fiscal year would increase or decrease in the annual net income by $2.0 million to $2.5 million based on the current amounts outstanding under the Credit Agreement.

See the discussion at “Recent Events and Trends - Operating Expenses” in Management's Discussion and Analysis of Financial Condition and Results of Operations for the impact of market changes on the Company's newsprint and pension costs.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.  Our management evaluated, with the participation of our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a - 15(e) or 15d - 15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, the Company's management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective at that time to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure and that such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission Rules and Forms.

Changes in internal control over financial reporting.  There was no change in our internal control over financial reporting that occurred during the second quarter of fiscal 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1A. Risk Factors

Forward-Looking Information:

This quarterly report on Form 10-Q contains forward-looking statements regarding the Company's actual and expected financial performance and operations.  These statements are based upon our current expectations and knowledge of factors impacting our business, including, without limitation, statements about litigation, the ability to consummate contemplated sales transactions for its assets or investments which may enable debt reduction on anticipated terms or at all, tax and other benefits from the sale of the (Minneapolis) Star Tribune newspaper, advertising revenues, return on pension plan assets and assumed salary increases, newsprint costs, amortization expense, stock option expenses, prepayment of debt, capital expenditures, sufficiency of capital resources and possible acquisitions and investments.  Such statements are subject to risks, trends and uncertainties.  Forward-looking statements are generally preceded by, followed by or are a part of sentences that include the words "believes," "expects," "anticipates," "estimates," or similar expressions.  For all of those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.  You should understand that the following important factors, in addition to those discussed elsewhere in this document and in the documents which we incorporate by reference, could affect the future results of McClatchy and could cause those future results to differ materially from those expressed in our forward-looking statements: general economic, market or business conditions, especially in any of the markets where we operate newspapers; impact of any litigation or any potential litigation; geo-political uncertainties including the risk of war; changes in newsprint prices and/or printing and distribution costs from anticipated levels; changes in interest rates; changes in pension assets and liabilities; increased competition from newspapers, internet sites or other forms of media reaching the markets we serve; increased consolidation among major retailers in our markets or other events depressing the level of advertising; changes in our ability to negotiate and obtain favorable terms under collective bargaining agreements with unions; competitive action by other companies; difficulties in servicing our debt obligations; other occurrences leading to decreased circulation and diminished revenues from retail, classified and national advertising; and other factors, many of which are beyond our control.

See McClatchy’s 2007 Form 10-K filed with the Securities and Exchange Commission on March 1, 2007 for further discussion of risk factors that could affect operating results.

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Item 4. Submission Of Matters To A Vote Of Security Holders:

The Company held its annual shareholders’ meeting on May 16, 2007 to vote on two proposals. Shareholders approved all of the proposals by voting as follows:

1.	Election of Directors of the Board
		VOTES
		FOR		WITHHELD
	Class A Common Stock
	Elizabeth Ballantine		46,813,690		2,495,780
	Kathleen Foley Feldstein		46,750,814		2,558,656
	P. Anthony Ridder		46,546,767		2,762,703
	Maggie Wilderotter		46,743,074		2,566,396
	Class B Common Stock
	Leroy Barnes, Jr.		23,786,457		-0-
	William K. Coblentz		23,786,457		-0-
	Molly Maloney Evangelisti		23,786,457		-0-
	Larry Jinks		23,786,457		-0-
	Joan F. Lane		23,786,457		-0-
	Brown McClatchy Maloney		23,786,457		-0-
	William B. McClatchy		23,786,457		-0-
	Kevin S. McClatchy		23,786,457		-0-
	Theodore Mitchell		23,786,457		-0-
	S. Donley Ritchey		23,786,457		-0-
	Gary B. Pruitt		23,786,457		-0-
	Frederick R. Ruiz		23,786,457		-0-

2.	Ratification of Deloitte & Touche LLP	FOR		AGAINST		ABSTAIN		BROKER NON-VOTES
	as independent auditors for 2007		28,686,832		22,282		8,290		-0-

Item 6.  Exhibitis

Exhibits filed as part of this Report as listed in the Index of Exhibits, on page 35 hereof.

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SIGNATURES

Pursuant to the requirements 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 McClatchy Company
	Registrant
August 10, 2007	By:  /s/ Gary B. Pruitt
Date	Gary B. Pruitt Chief Executive Officer
August 10, 2007	By:  /s/ Patrick J. Talamantes
Date	Patrick J. Talamantes Chief Financial Officer

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	INDEX OF EXHIBITS
Exhibit	Description
2.1*	Agreement and Plan of Merger, dated March 12, 2006, between the Company and Knight-Ridder, Inc., included as Exhibit 2.1 in the Company’s Current Report on Form 8-K filed March 12, 2007.
3.1*	The Company's Restated Certificate of Incorporation dated June 26, 2006, included as Exhibit 3.1 in the Company's Quarterly Report on Form 10-Q for the quarter ended June 25, 2006.
3.2*	The Company's By-laws as amended as of June 22, 2006, included as Exhibit 3.2 in the Company's Current Report on Form 8-K filed June 28, 2006.
4.1*	Form of Physical Note for Commercial Paper Program included as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 27, 2004.
10.1*	Credit Agreement dated June 27, 2006 by and among the Company, lenders party thereto, Bank of America, N.A., as Administrative Agent, Swing Line Lender and Letter of Credit Issuer, JPMorgan Chase Bank as Syndication Agent and Banc of America Securities LLC and JPMorgan Securities Inc. as Joint Lead Arrangers and Joint Book Managers, included as Exhibit 10.2 in the Company's Current Report on Form 10-Q filed for the quarter ending on June 25, 2006.
10.2*	Amendment 1 to Credit Agreement dated March 28, 2007 by and between The McClatchy Company and Bank of America, N.A., as Administrative Agent, included as Exhibit 99.1 in the Company's Current Report on Form 8-K filed April 2, 2007.
10.3*	Amendment 2 to Credit Agreement dated July 30, 2007 by and between The McClatchy Company and Bank of America, N.A., as Administrative Agent, included as Exhibit 10.1 in the Company's Current Report on Form 8-K filed July 31, 2007.
10.4*	General Continuing Guaranty dated May 4, 2007 by each Material Subsidiary in favor of the Lenders party to the Credit Agreement dated June 27, 2006 by and between The McClatchy Company, the Lenders and Bank of America, N.A., as Administrative Agent, included as Exhibit 10.3 in the Company’s Current Report on Form 10-Q for the quarter ending on April 1, 2007.
10.5*	Second Supplemental Indenture dated June 27, 2006, between the Company and Knight-Ridder, Inc. included as Exhibit 10.3 in the Company's Current Report on Form 10-Q filed for the quarter ending on June 25, 2006.
10.6*	Fourth Supplemental Indenture dated June 27, 2006, between the Company and Knight-Ridder, Inc. included as Exhibit 10.4 in the Company's Current Report on Form 10-Q filed for the quarter ending on June 25, 2006.
**10.7*	The McClatchy Company Management by Objective Plan Description included as Exhibit 10.4 in the Company's Report filed on Form 10-K for the Year ending December 31, 2000.
**10.8*	The Company's Amended and Restated Long-Term Incentive Plan included as Exhibit 99.1 to the Company's Report on Form 8-K filed May 23, 2005.
**10.9*	Amended and Restated Supplemental Executive Retirement Plan included as Exhibit 10.4 to the Company's 2001 Form 10-K.
**10.10*	The Company's Amended and Restated 1990 Directors' Stock Option Plan dated February 1, 1998 included as Exhibit 10.12 to the Company's 1997 Form 10-K.
**10.11*	Amended and Restated 1994 Stock Option Plan included as Exhibit 10.15 to the Company's Report on Form 10-Q filed for the Quarter Ending on July 1, 2001.

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**10.12*	Form of 2004 Stock Incentive Plan Nonqualified Stock Option Agreement included as Exhibit 99.1 to the Company's Current Report on Form 8-K filed December 16, 2004.
**10.13*	Amendment 1 to The McClatchy Company 2004 Stock Incentive Plan dated January 23, 2007, included as Exhibit 10.10 to the Company's 2006 Report on Form 10-K.
**10.14*	Form of Restricted Stock Agreement related to the Company's 2004 Stock Incentive Plan, included as Exhibit 99.1 to the Company's Current Report on Form 8-K dated January 28, 2005.
**10.15*	The Company's Amended and Restated Chief Executive Bonus Plan, included as Exhibit 10.12 to the Company's Report on Form 10-Q for the Quarter Ending June 29, 2003.
**10.16*	Amended and Restated Employment Agreement between the Company and Gary B. Pruitt dated October 22, 2003, included as Exhibit 10.10 to the Company's 2003 Form 10-K.
10.17*	Form of Indemnification Agreement between the Company and each of its officers and directors, included as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on May 23, 2005.
**10.18*	Amended and Restated 1997 Stock Option Plan included as Exhibit 10.7 to the Company's 2002 Report on Form 10-K.
**10.19*	Amendment 1 to The McClatchy Company 1997 Stock Option Plan dated January 23, 2007, included as Exhibit 10.16 to the Company's 2006 Report on Form 10-K.
**10.20*	The Company's Amended and Restated 2001 Director Stock Option Plan, included as Exhibit 10.13 to the Company's 2004 Report on Form 10-K.
**10.21*	Amendment 1 to The McClatchy Company 2001 Director Option Plan dated January 23, 2007, included as Exhibit 10.18 to the Company's 2006 Report on Form 10-K.
10.22*	Stock Purchase Agreement by and between The McClatchy Company and Snowboard Acquisition Corporation, dated December 26, 2006, included as Exhibit 2.1 to the Company's Report on Form 8-K filed December 26, 2006.
10.23	Contract for Purchase and Sale of Real Property by and between The Miami Herald Publishing Company and Richmond, Inc. and Knight Ridder, Inc. and Citisquare Group, LLC, dated March 3, 2005.
10.24	First amendment to Contract for Purchase and Sale of Real Property by and between The Miami Herald Publishing Company and Richmond, Inc. and Knight Ridder, Inc. and Citisquare Group, LLC, dated March 3, 2005.
21*	Subsidiaries of the Company.
31.1	Certification of the Chief Executive Officer of The McClatchy Company pursuant to Rule 13a-14(a) under the Exchange Act.
31.2	Certification of the Chief Financial Officer of The McClatchy Company pursuant to Rule 13a-14(a) under the Exchange Act.
32.1	Certification of the Chief Executive Officer of The McClatchy Company pursuant to 18 U.S.C. Section 1350.
32.2	Certification of the Chief Financial Officer of The McClatchy Company pursuant to 18 U.S.C. Section 1350.
*	Incorporated by reference
**	Compensation plans or arrangements for the Company's executive officers and directors

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EX-99.1 CHARTER

                                                                                                                                                                      & #160;                                                         Exhibit 10.23

CONTRACT FOR PURCHASE AND SALE OF REAL PROPERTY

This Contract is made and entered into as of the 3rd day of March, 2005, by and between The Miami Herald Publishing Company, a Florida corporation, Richwood, Inc., a Florida corporation, and Knight-Ridder, Inc., a Florida corporation (collectively the "Seller"), and Citisquare Group, LLC., a Florida limited liability company (the "Buyer").

In consideration of the mutual agreements herein set forth, the parties hereto agree as follows:

1.           Definitions. The following capitalized terms shall have the meanings given to them in this Section 1. Other capitalized terms when used in this Contract for Purchase and Sale shall have the meanings given to such terms in the Definitions Addendum attached hereto as Exhibit "B".

1.1.           Closing. The delivery of the Deed to Buyer concurrently with the delivery of the Purchase Price to Seller.

1.2.           Closing Date. The date of the Closing, which shall be the date which is Ninety (90) days following the Effective Date, or such other dates as maybe provided by this Contract.

1.3.           Deed. The Special Warranty Deed which conveys the Land from Seller to Buyer, the form of which is attached hereto as Exhibit "D".

1.4.          Deposit. The sum of Seven Million Five Hundred Thousand and 00/100 Dollars ($7,500,000.00), together with all interest earned on said sum while it is held in escrow by Escrow Agent in accordance with this Contract.

1.5.           Easements. Collectively, (i) an easement to be granted by Buyer to Seller over a portion of the Land described as "Lot C", and a portion of the Land commonly known as N.E. 14th Street, in favor of Seller for the use of its trucks and heavy equipment for access, ingress and egress, and the staging of trucks for pickup and delivery of materials (the "Truck Easement") and (ii) an easement to be granted by Buyer to Seller for the purpose of parking up to a maximum amount of 740 vehicles, both in a location or locations on the Land to be designated by Buyer and reasonably approved by Seller, as Buyer formulates its development plans for the Land (the "Parking Easement"); provided, however, that upon completion of the construction of all of the improvements on the Land, Purchaser agrees to provide a minimum of 100 parking spaces on that portion of the Land known as Lot A, which is immediately adjacent and proximate to the front lobby entrance of the Herald Office Building. If, prior to the completion of the improvements, such parking on the Land would interfere in any material respect with Purchaser's construction process or materially increase the cost thereof, Purchaser shall have the right, to provide alternate sites for parking, as contemplated in the Parking Easement. The form of Truck Easement is attached hereto as Exhibit "G". The form of Parking Easement is attached hereto as Exhibit "H".

1.6.          Effective Date. The date this Contract is executed by the last party (excluding Escrow Agent and Broker) to sign it.

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1.7.          Environmental Laws means any federal, state, or local law, statute, ordinance, rule or regulation governing pollution, contamination, protection of the environment, human health or safety, health or safety of employees, sanitation, and any matters relating to emissions, discharges, disseminations, releases or threatened releases, of Hazardous Materials into the air (indoor and outdoor), surface water, groundwater, soil, land surface or subsurface, buildings, facilities, real or personal property or fixtures or otherwise, arising out of relating to, or resulting from the manufacture, processing, distribution, use, treatment, storage, disposal, transport, handling, release or threatened release of Hazardous Materials (collectively, "Environmental Matters"), as the same have been or may be amended from time to time, including any common law cause of action providing any right or remedy relating to Environmental Matters, and all applicable judicial and administrative decisions, orders, and decrees relating to Environmental Matters.

1.8.          Escrow Agent. Seller's Attorney shall be the Escrow Agent.

1.9.          Intended Uses refers to a mixed use residential and commercial development to be comprised of one or more buildings, a parking garage and other appurtenant facilities.

1.10.        Hazardous Materials means any pollutants, contaminants, toxic or hazardous or extremely hazardous substances, materials, wastes, constituents, compounds, chemicals, natural or man-made elements or forces (including petroleum or any by-products or fractions thereof, any form of natural gas, lead, asbestos and asbestos-containing materials ("ACMs"), polychlorinated biphenyls ("PCBs") and PCB-containing equipment, radon and other radioactive elements, ionizing radiation, electromagnetic field radiation and other non-ionizing radiation, infectious, carcinogenic, mutagenic, or etiologic agents, pesticides, defoliants, explosives, flammables, corrosives and urea formaldehyde foam insulation) that are regulated by, or form the basis of liability under, any Environmental Laws.

1.11.       Geo-Technical Study Period means the period of time beginning seventy two (72) hours after the effective Date and concluding sixty days thereafter, provided that Buyer has received access to the Property for such purposes as provided in Section 4.1(b) herein.

1.12.      Improvements. The building known as the "Boulevard Shops" located on that portion of the Land identified as "Lot D", together with all improvements or other structures owned by Seller and located on the Land.

1.13.      Investigation Period. The period of time beginning seventy two (72) hours after the effective Date and concluding forty five (45) days thereafter, provided that Buyer has received access to the Property for such purposes as provided in Section 4.1(a) herein.

1.14.      Land. That certain real property located in Miami-Dade County, Florida and more particularly described in Exhibit "A" attached hereto and made a part hereof.

1.15.      Lease. The only lease of space in the Improvements which is dated as of April 1, 2002 and is between Richwood Incorporated, as landlord therein, and the United States of America (the "Tenant"), as tenant therein.

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1.16.      Permitted Exceptions. The title exceptions set forth in Exhibit "C" attached hereto.

1.17.      Personal Property. Any items of personal property owned by Seller and located in the improvements.

1.18.      Property. Collectively, the Land, Improvements, Personal Property and Property Records.

1.19.      Property Records. Originals (to the extent available) or copies (to the extent originals are not available) of the following documents relating to the Property (if in the possession of Seller or any agent of Seller): the Prior Policy, all licenses, permits, certificates of occupancy, real and personal property tax bills, architectural and engineering plans, surveys, environmental reports and studies, leases, service contracts, and financial records of the Property.

1.20.      Remedial Actions means all actions required by Environmental Laws related to the investigation, assessment, removal, remediation, abatement or mitigation, and including monitoring, of any event or conditions arising from or relating to the presence of any Hazardous Materials(s) on, at, under or migrating from the Property.

                    1.21.     Purchase Price. The sum of One Hundred and Ninety Million and 00/100 Dollars ($190,000,000.00).

1.22.      Rent. All rent and other charges, taxes, insurance, operating expenses, parking fees, late fees and any other payments for miscellaneous services performed by Seller under the Lease.

1.23.      Service Contracts. All service contracts and maintenance agreements entered into by Seller or on behalf of Seller relating to the operation or maintenance of the Property which will affect the Property after Closing. A schedule of Service Contracts, if any, is attached hereto as Exhibit "L".

2.           Purchase and Sale. Seller agrees to sell and convey the Property to Buyer and Buyer agrees to purchase and acquire the Property from Seller on the terms and conditions hereinafter set forth.

3.           Purchase Price. The Purchase Price shall be paid as follows:

3.1.       Deposit. Concurrently with the execution of this Contract by Buyer and Seller, Buyer shall deliver to Escrow Agent the Deposit. The Deposit shall be placed by the Escrow

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Agent in an insured interest-bearing escrow account (with a banking institution as agreed to by both Buyer and Seller) with a commercial or savings bank doing business in the County where the Escrow Agent is located. The Buyer shall provide its taxpayer identification or social security number concurrently with the delivery of the Deposit, together with a completed and executed W-9 Form. All interest that accrues on the Deposit shall accrue for the benefit of Buyer, unless Buyer defaults hereunder and Seller retains the Deposit, in which event Seller shall retain all interest accrued thereon.

3.2.       Independent Consideration. In all events, the sum of One Hundred and No/100 Dollars ($100.00) (the "Independent Consideration") which sum has been bargained for and agreed to as consideration for Seller's execution and delivery of this Contract will be payable to Seller out of the Escrow Deposit, even if this Contract is terminated under its express provisions. The Independent Consideration is independent of all other consideration provided in this Contract, and is non-refundable in all events. Seller and Buyer stipulate that the Independent Consideration is sufficient consideration to support this Contract notwithstanding Buyer's rights to terminate this Contract as set out in this Contract.

3.3.       Cash to Close. The Cash to Close and the Deposit shall be paid to Seller in accordance with the closing procedure hereinafter set forth.

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4.           Investigation Period.

4.1.       Buyer's Inspection of the Property.

(a)        During the Investigation Period, Buyer shall have the right to enter upon the Land andImprovements to make inspections and investigations of the condition of the  Property which Buyer deems reasonably necessary, including, without limitation, inspections for the purpose of conducting a Phase II environmental assessment of the Property ("Inspection"), consistent with the general parameters of ASTM 1903 or similar Phase II Environmental Assessment parameters, the findings of which relative to the presence, if any, of any Recognized Environmental Condition shall be disclosed to Seller pursuant to Exhibit "M," paragraph (a). Buyer's Inspection shall be completed utilizing procedures and equipment which minimize to the greatest extent reasonably practicable, the potential for environmental damage to the Property. After completing its Inspection of the Property, Buyer shall, at its sole cost and expense, repair any damage it has caused to the Property. Buyer's Inspection shall be at Buyer's sole cost and expense and shall be conducted during normal business hours with adequate prior notice (at least 72 hours) to Seller to enable Seller to have Seller's representative present at any on-site inspections. Prior to conducting any Inspection, Buyer shall provide Seller with the scope of work to be conducted, however, Seller's approval of the scope of work shall not be required. Seller shall be given the opportunity to have Seller's representatives, which may include a third party consultant, present during any sampling activities performed as part of Buyer's Inspection and such representatives shall be entitled to receive a portion of the sampling materials collected (i.e. Buyer and Seller will "split" samples) utilizing procedures which are customary and accepted practices by environmental professionals. Seller shall be responsible for all costs associated with the presence of Seller's representatives during Buyer's Inspection and will bear all costs associated with any testing Seller conducts on Seller's portions of any materials collected on the Property. All Inspections shall be conducted in such a manner as not to unreasonably interfere in any material respect with Seller's business operations on the Property. All information obtained or generated by the Buyer during the Investigation Period and thereafter until Closing with respect to such Environmental Assessment (as hereunder defined in Exhibit "M," paragraph (a)) and other investigation and testing performed on or in relation to the Property shall be kept confidential except for disclosures to such professionals, investors, lawyers and mortgage lenders ("Buyer's Consultants") as may be reasonably required in connection with Buyer's investigation and acquisition of the Property, or as otherwise required by any law which requires Buyer or its Consultants to make disclosure of such information. Notwithstanding the foregoing, if any matter relating to Buyer's Environmental Assessment and Inspection of the Property must, by law, be reported or disclosed to a governmental entity by the property owner or operator and Buyer has not closed on the Property, Buyer shall notify Seller and Seller shall determine if disclosure is required and thereafter make any required disclosure or report to the applicable governmental entity. Notwithstanding the foregoing, the confidentiality provision set forth in this section shall be in addition to and shall in no way limit any confidentiality requirements placed on the Buyer pursuant to any separate confidentiality agreement. Buyer shall deliver to Seller no later than the last day of the Investigation Period, a copy of the final report of the Environmental Assessment (as hereinafter defined in Exhibit "M," paragraph (a)). Buyer's contract(s) with third parties performing any portion of the Inspection on the Property shall require that all information concerning the Property remain confidential except as required by any law which requires Buyer or its Consultants to make disclosure of such information.

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(b)           If Buyer has been unable to complete geo-technical subsurface investigations that Buyer deems reasonably necessary for designing and engineering Buyer's planned improvements to the Property during the Investigation Period, Buyer shall have the right to continue such geotechnical subsurface investigations during the remainder of the Geo-Technical Study Period. If the Geo-Technical Study Period extends beyond the Investigation Period, Buyer shall conduct no further investigations or inspections related to the Environmental Condition of the Property during such Geo-Technical Study Period, and shall be deemed to have waived all rights to object to any new Environmental Condition (as hereafter defined in Exhibit "M," paragraph (a)) discovered inadvertently, or by whatever means, in connection with and/or during any geo-technical testing occurring after the conclusion of the Investigation Period ("Waiver of New Environmental Condition"), provided, however, that such Waiver of New Environmental Condition shall not in any manner whatsoever limit, monetarily or otherwise, Seller's Remedial Obligations (as hereinafter defined in Exhibit "M," paragraph (a)) if such new Environmental Condition is discovered (i) by Seller in conjunction with preparation of the Response Plan, (ii) by any governmental agency in its review or approval of the Response Plan, (iii) by Seller in response to any governmental agency's requirements imposed during such review and approval of the Response Plan, (iv) in connection with Seller's performance of the Seller's Remedial Obligations, or (v) as a result of Buyer's performance of Post-Closing Work (as hereinafter defined in Exhibit "M," paragraph (e)) based on what was discovered during the Investigation Period and/or work required by a governmental agency as a part of the Response Plan based on what was discovered during the Investigation Period.

(c)           After the conclusion of the Geo-Technical Study Period and until the Closing Date, Buyer shall have the right to enter upon the Land and Improvements to make inspections and investigations of the condition of the Property which Buyer deems reasonably necessary, however, such inspection and investigations shall not include any sub-surface activities, including but not limited to drilling, sampling, coring or testing of the soils, groundwater or building foundations of any Improvements on the Property. Any inspections or investigations Buyer undertakes after the Investigation Period will be conducted in a manner which shall, to the extent reasonably practicable, minimize interference with Seller's business operations on the Property.

4.2.       Property Records. Following the Effective Date, Buyer may elect to examine the Property Records at the Property or such other place as Seller and Buyer shall mutually agree. Seller shall make the Property Records available to Buyer for examination at such location during normal business hours after reasonable notice to Seller. Buyer may, at its sole cost and expense, make copies of the Property Records. Buyer acknowledges that the Property Records are being provided to Buyer without warranty or representation. Without limiting the foregoing, Buyer specifically acknowledges that the Property Records may be incomplete, inaccurate or otherwise deficient and as such, the Property Records are being made available to Buyer solely as an accommodation to Buyer. Buyer is not entitled to rely upon the information contained in the Property Records for any purpose and Buyer will make its own independent evaluation of the Property and the matters set forth in the Property Records. Neither the Seller nor the Seller's representatives can be relied upon to provide representations as to historic use of or operations upon the Property by Seller or others. If this Contract is terminated prior to Closing, Buyer will return all copies of the Property Records to Seller.

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4.3        Environmental Matters.  All environmental matters will be addressed as provided in Exhibit "M" attached hereto and made a part hereof.

4.4.       Buyer's Right to Terminate. Buyer shall not have the right to terminate this Contract (and the Deposit shall not be refundable), except as provided in Exhibit "M" or  Section 5 herein or for an uncured material breach of a representation, warranty or covenant by Seller or in the event of a condemnation to the extent herein provided. Failure by Buyer to timely notify Seller of an Environmental Condition or an objection to an Additional Exception as provided in Exhibit "M" and Section 5 respectively during the Investigation Period shall be deemed a waiver of Buyer's rights to make any future objections with respect to same. If this Contract is not terminated as provided herein, except as expressly provided otherwise in this Agreement, Buyer shall be deemed to have acknowledged that (a) BUYER HAS HAD THE FULL OPPORTUNITY TO MAKE SUCH INVESTIGATION OF THE CONDITION OF THE PROPERTY AS BUYER HAS DEEMED NECESSARY; (b) BUYER IS RELYING SOLELY UPON ITS OWN INVESTIGATION IN MAKING THE DECISION TO PURCHASE THE PROPERTY; AND (c) BUYER WILL ACCEPT THE PROPERTY IN ITS "AS IS" CONDITION, WITHOUT ANY OBLIGATION OF SELLER TO MAKE ANY REPAIRS OR RENOVATIONS TO THE PROPERTY, AND WITH NO REPRESENTATIONS OR WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE.

4.5.       Service Contracts. Intentionally omitted.

4.6.       Indemnification. Buyer hereby agrees to indemnify Seller and hold Seller harmless against all claims, demands and liability, including Attorneys' Fees, for nonpayment for services rendered to Buyer, for construction liens, for payment of expenditures related to preparation and implementation of the Response Plan in excess of the Cap and for damage to persons or property arising out of Buyer's negligence in the conduct of its Inspection of the Property or activities, Buyer's activities during the Geo-Technical Study Period or Buyer's Post-Closing Work. Following the Closing on this transaction, Seller shall indemnify Buyer and hold Buyer harmless against all claims, demands and liability, including reasonable Attorneys' Fees, for nonpayment of Seller's construction liens affecting the Property. Notwithstanding anything to the contrary set forth in this Contract, the indemnification and agreement to hold harmless set forth in this Section shall survive the Closing or the earlier termination of this Contract.

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4.7.       Liability Insurance. Buyer's right to enter the Property during the InvestigationPeriod and Geo-Technical Study Period and thereafter shall be subject to Buyer's prior delivery to Seller of an insurance binder evidencing that Buyer has obtained a liability insurance policy for the Property insuring Buyer and its agents and naming the Seller as an additional insured. Buyer shall furnish insurance coverage for the benefit of the Seller and the Buyer shall furnish to the Seller an ACORD form certificate of insurance issued by or on behalf of an insurance company authorized to do business in the State of Florida which insurance company must have a Best rating of B+ VII or higher and which certificate of insurance shall evidence the following insurance coverages for the Buyer and its agents: (i) $5 million commercial general liability insurance coverage, including coverage for bodily injury, personal injury and property damage, and (ii) workers-compensation coverage as required by the State of Florida including employer-s liability coverage with limits of $1 million bodily injury each accident, and $5 million bodily injury by disease. Such liability insurance shall be reasonably approved by Seller prior to Buyer entering the Property.

4.8.       Security Interest in the Deposit Buyer hereby grants Seller a security interest in the Deposit as security for Buyer's obligation to indemnify Seller under this Section 4 and Exhibit "M". In the event that Seller suffers any loss or damage prior to Closing resulting from nonpayment for services rendered to Buyer, for construction liens, for Seller's expenditures related to performance of Seller's Remedial Obligations in excess of the Cap and for damage to persons or property arising out of Buyer's negligence in the conduct of its Phase II Inspection of the Property, activities during the Geo-Technical Study Period and Buyer fails to reimburse Seller for such loss or damage within ten (10) days after written notice thereof from Seller to Buyer specifying the nature of such loss or damage, Seller shall have the right to receive the Deposit or a portion thereof as reimbursement for such loss or damage, and Buyer shall promptly replace that portion of the Deposit disbursed to Seller hereunder. Buyer's failure to replace the Deposit shall be a default under this Contract. Notwithstanding the foregoing, if Buyer shall dispute its responsibility for any amounts hereunder for which Seller seeks to impose liability on Buyer, the same shall be resolved by expedited arbitration in accordance with the expedited arbitration rules of the American Arbitration Association ("AAA").

4.9.       NO REPRESENTATIONS OR WARRANTIES. TO THE MAXIMUM EXTENT PERMITTED BY LAW, AND EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED FOR IN THIS CONTRACT OR IN THE CLOSING DOCUMENTS, SELLER HAS NOT, DOES NOT AND WILL NOT MAKE ANY REPRESENTATIONS OR WARRANTIES, OF ANY KIND, ORAL OR WRITTEN, EXPRESS OR IMPLIED, CONCERNING THE PROPERTY, THE SERVICE CONTRACTS OR THE LEASE, INCLUDING, WITHOUT LIMITATION (i) THE VALUE, CONDITION, PROSPECTS, MERCHANTABILITY, HABITABILITY, PROFITABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE, OF THE PROPERTY OR THE PROFITABILITY OF THE LEASE AND/OR THE SERVICE CONTRACTS, (ii) THE CONDITION OR QUALITY OF THE CONSTRUCTION OR MATERIALS INCORPORATED INTO THE PROPERTY, OR (iii) THE MANNER OF REPAIR, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH HEREIN, THIS SECTION 4 SHALL SURVIVE THE CLOSING.

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4.10.   NO ENVIRONMENTAL REPRESENTATIONS. SELLER HAS NOT, DOES NOT AND WILL NOT MAKE ANY REPRESENTATIONS OR WARRANTIES WITH REGARD TO COMPLIANCE WITH ANY GOVERNMENTAL REQUIREMENT, INCLUDING, BUT NOT LIMITED TO, THOSE PERTAINING TO THE HANDLING, GENERATING, TREATING, STORING OR DISPOSING OF ANY HAZARDOUS MATERIAL. BUYER WAIVES AND RELEASES SELLER FROM ANY PRESENT OR FUTURE CLAIMS ARISING FROM OR RELATING TO THE PRESENCE OR ALLEGED PRESENCE OF HAZARDOUS MATERIAL IN, ON, UNDER OR ABOUT THE LAND OR THE PROPERTY, INCLUDING ANY CLAIMS UNDER OR ON ACCOUNT OF (i) THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980, AS THE SAME MAY HAVE BEEN OR MAY BE AMENDED FROM TIME TO TIME ("CERCLA"), AND SIMILAR STATE STATUTES, AND ANY REGULATIONS PROMULGATED THEREUNDER, OR (ii) ANY OTHER GOVERNMENTAL REQUIREMENT OR ENVIRONMENTAL LAW NOW OR HEREAFTER IN EFFECT THAT DEALS WITH OR OTHERWISE IN ANY MANNER RELATES TO, ENVIRONMENTAL MATTERS OF ANY KIND, OR (iii) THE COMMON LAW. PROVIDED, HOWEVER, NOTWITHSTANDING THE FOREGOING, NOTHING CONTAINED HEREIN SHALL LIMIT SELLER'S OBLIGATIONS UNDER EXHIBIT "M" HEREOF.

4.11.     PROPERTY RECORDS. IN THE CLOSING DOCUMENTS, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES AS TO THE TRUTH, ACCURACY OR COMPLETENESS OF ANY PROPERTY RECORDS, MATERIALS, DATA OR OTHER INFORMATION SUPPLIED TO BUYER IN CONNECTION WITH BUYER'S INSPECTION OF THE PROPERTY (E.G., THAT SUCH MATERIALS ARE COMPLETE, ACCURATE OR THE FINAL VERSION THEREOF, OR THAT ALL SUCH MATERIALS ARE IN SELLER'S POSSESSION). IT IS THE PARTIES EXPRESS UNDERSTANDING AND AGREEMENT THAT SUCH MATERIALS ARE PROVIDED ONLY FOR BUYERS CONVENIENCE IN MAKING ITS OWN EXAMINATION AND DETERMINATION PRIOR TO THE EXPIRATION OF THE INVESTIGATION PERIOD AS TO WHETHER IT WISHES TO PURCHASE THE PROPERTY AND, IN DOING SO, BUYER SHALL RELY EXCLUSIVELY ON ITS OWN INDEPENDENT INVESTIGATION AND EVALUATION OF EVERY ASPECT OF THE PROPERTY AND NOT ON ANY MATERIALS SUPPLIED BY SELLER, IN THE CLOSING DOCUMENTS. BUYER EXPRESSLY DISCLAIMS ANY INTENT TO RELY ON ANY SUCH MATERIALS PROVIDED TO IT BY SELLER IN CONNECTION WITH ITS INSPECTION AND AGREES THAT IT SHALL RELY SOLELY ON ITS OWN INDEPENDENTLY DEVELOPED OR VERIFIED INFORMATION. NOTWITHSTANDING THE FOREGOING, SELLER SHALL NOT BE RELEASED OF ANY LIABILITY UNDER THIS SECTION 4.11 TO THE EXTENT THAT SELLER HAS PREPARED ANY OF THE PROPERTY RECORDS AND ONLY TO THE EXTENT THAT IT HAS WILLFULLY FALSIFIED SUCH PROPERTY RECORDS.

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                    4.12.     NO LIABILITY FOR SPECULATIVE PROFITS. SELLER SHALL NOT BE LIABLE TO BUYER FOR ANY PROSPECTIVE OR SPECULATIVE PROFITS, OR SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES, WHETHER BASED UPON CONTRACT, TORT OR NEGLIGENCE OR IN ANY OTHER EVENT ARISING FROM THE TRANSACTIONS CONTEMPLATED BY THIS CONTRACT. BUYER SHALL NOT BE LIABLE TO SELLER FOR ANY SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES, WHETHER BASED UPON CONTRACT, TORT OR NEGLIGENCE OR IN ANY OTHER EVENT ARISING FROM THE TRANSACTIONS CONTEMPLATED BY THIS CONTRACT.

5.           Title.

5.1.       Marketable Title. Seller shall convey to Buyer marketable title to the Property, subject only to the Permitted Exceptions. Marketable title shall be determined according to the Uniform Title Standards adopted by The Florida Bar.

5.2.       Delivery of Title Commitment. Within ten (10) days following the effective Date, Seller shall obtain and deliver to Buyer or Buyer's Attorney the Title Commitment, together with a copy of each instrument shown as an exception or pertaining to a requirement in Schedule B thereof.

5.3.       Buyer to Notify Seller of Additional Exceptions. If the Title Commitment reflects that title to the Land is subject to any exception (the "Additional Exceptions") other than the Permitted Exceptions, or if at any time after delivery of the Title Commitment and prior to Closing, Buyer receives notice of or otherwise discovers that title to the Land is subject to any Additional Exceptions, Buyer shall notify Seller in writing of the Additional Exceptions to which Buyer objects within ten (10) days after Buyer receives written notice of such Additional Exceptions from the title company issuing such Title Commitment. If Buyer fails to deliver timely notice to Seller of any Additional Exceptions within such time period, Buyer shall be deemed to have waived its right to object to same, and Buyer shall proceed to Closing as hereinafter provided. If Buyer is not notified in writing by the title company issuing such Title Commitment of any items or matters that maybe considered an Additional Exception, then Buyer shall be deemed to have objected to such Additional Exceptions until they are so notified, at which point the notice requirements set forth in this Section shall apply.

5.4.       Additional Exceptions. If Buyer has timely notified Seller of any Additional Exceptions as to which Buyer objects, Seller shall have the following options:

 5.4.1.   Mandatory Additional Exceptions. If the Additional Exceptions are liquidated claims, judgments, taxes (other than taxes which are subject to adjustment pursuant to this Contract), or are otherwise curable by the payment of money, without resort to litigation, and do not, in the aggregate, exceed $1,000,000.00 or if there are mortgages, deeds of trust, mechanics liens or similar liens of a liquidated amount voluntarily created by Seller, then Seller shall be required to remove such Additional  Exceptions (the "Mandatory Additional Exceptions") from the Land by taking the actions necessary to have the Mandatory Additional Exceptions deleted or insured over by the Title Company, or transferred to bond so that the Mandatory Additional Exceptions are removed from the Title Commitment.

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            5.4.2.   Optional Additional Exceptions. With regard to all Additional Exceptions which are not Mandatory Additional Exceptions (the "Optional Additional Exceptions"), Seller shall have the right, but not the obligation, to take the actions necessary to have the Optional Additional Exceptions deleted or insured over by the Title Company, or transferred to bond so that the Optional Additional Exceptions are removed from the Title Commitment. Seller shall provide Buyer with written notice of its election as to whether or not it will cure the Optional Additional Exceptions within ten (10) days after Seller's receipt of Buyer's notice of any Optional Additional Exceptions. If Seller notifies Buyer that it will not attempt to cure the Optional Additional Exceptions, Buyer shall have the option, to be exercised within ten (10) days after Buyer's receipt of Seller's notice, to either proceed to Closing and accept title in its existing condition without adjustment to the Purchase Price, or to receive back the Deposit. If Seller elects to cure an objection, but after its exercise of good faith efforts, fails to do so by the Closing Date, Buyer shall have the right to terminate this Contract and receive a full refund of the Deposit, in which event the parties shall be released and relieved from any obligations hereunder, except as otherwise expressly provided for, or Buyer may close the transaction and waive such objection without any adjustment to the Purchase Price. In the event Buyer elects to receive back the Deposit, this Contract shall be deemed terminated and thereafter neither Buyer nor Seller shall have any further rights or obligations hereunder, except as otherwise expressly provided herein.

5.5.       Seller's Right to Extend Closing Date. If Seller fails or otherwise determines that it shall be unable to cure the Mandatory Additional Exceptions or those Optional Additional Exceptions which it has elected to cure on or before the Closing Date, Seller shall have the right to postpone the Closing Date for a period of up to ninety (90) days in order to afford Seller additional time to cure the Mandatory Additional Exceptions and such Optional Additional Exceptions, by sending written notice to Buyer and Escrow Agent not later than five (5) days prior to the Closing Date. If the Closing Date has been postponed, at such time as Seller has successfully cured the Mandatory Additional Exceptions and such Optional Additional Exceptions, Seller shall reschedule the Closing by sending written notice to Buyer and Escrow Agent not less than ten (10) days prior to the rescheduled Closing Date. In the event that Seller is unable to cure any Optional Additional Exceptions within ninety (90) days after the originally scheduled Closing Date, Buyer shall have the option, to be exercised within fifteen (15) days after receipt of Seller's notice thereof, to either accept title in its existing condition without adjustment to the Purchase Price by reason of such Optional Additional Exceptions, or to terminate this Contract and receive back the Deposit (less the Independent Consideration), and thereafter neither Buyer nor Seller shall have any further rights or obligations hereunder except as otherwise expressly provided herein. Notwithstanding the foregoing, with respect to Mandatory Additional Exceptions, Buyer shall have the right to close and reduce the Cash to Close by all amounts necessary to cure such Mandatory Additional Exceptions and to use such amounts to satisfy such Mandatory Additional Exceptions.

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5.6.      Additional Exceptions Caused by Buyer. Buyer shall not have the right to object to title or to terminate this Contract by reason of any Additional Exception, which is caused by Buyer or by any party claiming by, through or under Buyer.

6.           Survey.

6.1.       Delivery of Survey. Within five (5) days following the Effective Date, Seller shall

deliver to Buyer a copy of the most recent survey available for the Property, Buyer may, within thirty (30) days, or such longer time as may be reasonably necessary to obtain such updated survey, following receipt of the current survey, obtain an updated survey (the "Survey") of the Land prepared by a land surveyor or engineer registered and licensed in the State of Florida. Buyer shall pay the cost of the Survey.

6.2.       Survey Defects. If the Survey shows any matter which would affect the marketability of title to the Land (except for the Permitted Exceptions and other title matters otherwise permitted hereunder), Buyer shall promptly notify Seller in writing of the specific defect promptly after receipt of the Survey. The Survey defect shall be treated in the same manner as title defects are treated under this Contract. Buyer's failure to deliver timely notice of Survey defects shall be deemed a waiver of Buyer's right to object to Survey matters as provided in this Section.

7.           Seller's Representations.

7.1.       Representations and Warranties. Seller hereby represents and warrants to Buyer as of the Effective Date and as of the Closing Date as follows:

 7.1.1.   Seller's Existence. Seller has full power and authority to own and sell the Property and the Miami Herald Building Site (as hereinafter defined) and to comply with the terms of this Contract.

 7.1.2.   Authority. The execution and delivery of this Contract by Seller and the consummation by Seller of the transaction contemplated by this Contract are within  Seller's capacity and all requisite action has been taken to make this Contract valid and binding on Seller in accordance with its terms.

 7.1.3.   Litigation. There are no actions, suits, proceedings or investigations pending or, to the knowledge of Seller, threatened against Seller or the Property affectingany portion of the Property.

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             7.1.4.    Parties in Possession. There are no parties other than Seller in possession of any portion of the Land, other than the Tenant under the Lease, a full, correct and complete copy of which has been provided to Buyer. The Lease is the only lease or occupancy agreement affecting the Land.

             7.1.5     Service Contracts. The schedule of Service Contracts attached to this Contract as Exhibit L constitutes a list of all the Service Contracts affecting the Property. To the extent there are additional Service Contracts affecting the Property not disclosed on such Schedule, Buyer shall have the right to either assume such additional Service Contracts or cause Seller to terminate same prior to Closing.

 7.1.6.    Security Deposits. The only security deposit being held by Seller is as follows: None .

7.2.       Survival of Representations. All of the representations of the Seller set forth in this Contract shall be true upon the execution of this Contract, shall be deemed to be repeated at and as of the Closing Date, and shall be true as of the Closing Date. All of the representations, warranties and agreements of the Seller set forth in this Contract shall survive the Closing for only six (6) months.

7.3.       Buyer's Pre-Closing Remedies for Seller's Misrepresentations. In the event that Buyer becomes aware prior to Closing that any of Seller's warranties or representations set forth in this Contract are not true on the Effective Date or at anytime thereafter but prior to Closing, and in the event that Seller is unable to render any such representation or warranty true and correct as of the Closing Date, Buyer may either: (a) terminate this Contract by written notice thereof to Seller and Escrow Agent, in which event the Deposit shall be returned to Buyer (less the Independent Consideration), and the parties will be relieved of all further obligations hereunder, or (b) elect to close under this Contract notwithstanding the failure of such representation, in which event the Closing shall be deemed a waiver by Buyer of the failure of such representation and warranty and the Buyer may not recover from the Seller any damages sustained by the Buyer.

8.           Buyer's Representations. Buyer hereby represents and warrants to the Seller as of the Effective Date and as of the Closing Date as follows:

8.1.      Buyer's Existence. Buyer is a limited liability company duly organized, existing, in good standing and qualified to do business under the laws of the State of Florida, and Buyer has full power and authority to purchase the Property and to comply with the terms of this Contract.

8.2.      Authority. The execution and delivery of this Contract by Buyer and the consummation by Buyer of the transaction hereby contemplated are within Buyer's capacity and all requisite action has been taken to make this Contract valid and binding on Buyer in accordance with its terms.

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9.           Closing. Subject to all of the provisions of this Contract, Buyer and Seller shall close this transaction on the Closing Date commencing at 10:00 a.m. The Closing shall take place at the office of Seller's Attorney, or, if the Buyer is financing all or a portion of the Purchase Price by an institutional loan, at the office of such lender or its attorney, in Miami-Dade County, Florida.

10.           Seller's Closing Documents. At Closing, Seller shall deliver the following documents ("Seller's Closing Documents") to Buyer:

10.1.     Deed. The Deed, in the form attached hereto as Exhibit "D", which shall be duly executed and acknowledged by Seller so as to convey to Buyer good and marketable fee simple title to the Property free and clear of all liens, encumbrances and other conditions of title other than the Permitted Exceptions.

10.2.     Bill of Sale. The as-is bill of sale (the `Bill of Sale"), in the form attached hereto as Exhibit "E", which shall be duly executed and acknowledged by Seller so as to transfer, quitclaim and deliver to Buyer, all of Seller's right, title and interest, if any, in and to the Personal Property. Buyer acknowledges that Seller shall not warrant title to the personal property and that by its execution and delivery of the Bill of Sale, Seller shall convey to Buyer whatever interest Seller has in the Personal Property.

10.3.     Seller's No Lien, Gap and FIRPTA Affidavit. An affidavit from Seller attesting that, to the best of Seller's knowledge, as follows: (a) no individual or entity has any claim against the Land under the applicable contractor's lien law, (b) except for Seller and as otherwise provided herein, no individual or entity is either in possession of the Property or has a possessory interest or claim in the Property, and (c) no improvements to the Property have been made for which payment has not been made within the immediately preceding ninety (90) days. The affidavit shall also include language sufficient to enable the Title Company to insure the "gap", i.e., delete as an exception to the Title Commitment any matters appearing between the effective date of the Title Commitment and the effective date of the Title Policy. The affidavit shall also include the certification of non-foreign status required under Section 1445 of the Internal Revenue Code to avoid the withholding of income tax by the Buyer. The form of Seller's affidavit is attached hereto as Exhibit "F".

10.4.     Assignment of Lease. The Assignment of Lease and Assumption Agreement (the "Assignment of Lease"), substantially in the form attached hereto as Exhibit "I", assigning to Buyer all of the Seller's interest under the Lease. Buyer shall assume all of Seller's liabilities and responsibilities under the Lease arising on the Closing Date and thereafter. The Assignment of Lease shall contain an indemnity from Buyer in favor of Seller against any action relating to the Lease, rents, security deposit and prepaid rent occurring on and after the Closing Date, and a reciprocal indemnity from Seller in favor of Buyer against any action relating to the Lease, rents, security deposit and prepaid rent occurring prior to the Closing Date.

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10.5.     General Assignment. The General Assignment (the "General Assignment") in the form attached hereto as Exhibit "J", assigning to Buyer all of the Seller's interest under all Service Contracts, together with all of Seller's interest in any licenses, warranties, trade or assumed names, developer's rights or agreements, as-built plans and specifications, permits and certificates of occupancy, assigning to Buyer all of Seller's right, title and interest in and to the foregoing to the extent such rights exist and are in the Seller's control and are assignable. Buyer shall assume all of the obligations of Seller as described in the General Assignment as of the Closing Date and thereafter (if Buyer elects to accept the assignment of same). The General Assignment shall contain an indemnity from Buyer in favor of Seller against any action relating to any Service Contracts, licenses, warranties, trade or assumed names, developer's rights or agreements, as-built plans and specifications, permits and certificates of occupancy, occurring on and after the Closing Date, and a reciprocal indemnity from Seller in favor of Buyer against any action relating to any Service Contracts, licenses, warranties, trade or assumed names, developer's rights or agreements, as-built plans and specifications, permits and certificates of occupancy, occurring prior to the Closing Date.

10.6.     Lease and Service Contracts. The originals of the Lease and all Service Contracts in the possession of Seller or, if originals are unavailable, copies thereof certified by Seller as being true, correct and complete.

10.7.     Notice of Change of Ownership. Copies of a letter signed by Seller to be delivered by Buyer to the Tenant and service providers of the Property, giving notice of the change of ownership of the Property.

10.8.     Closing Statement. A closing statement setting forth the Purchase Price, Deposit and all credits, adjustments and prorations between Buyer and Seller, and the net Cash to Close due Seller and executed by Buyer and Seller.

10.9.     Form 1099-B. Such federal income tax reports respecting the sale of the Property as are required by the Internal Revenue Code of 1986.

10.10.  Authorizing Resolutions. Certificates of such resolutions in form and content as Buyer or the Title Company may reasonably request evidencing Seller's existence, power, and authority to enter into and execute this Contract and to consummate the transaction herein contemplated.

10.11.   Easements. The Easements, substantially in the forms attached hereto as Exhibits "G" and "H". The Easements shall be recorded immediately following the recording of the Deed.

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11.           Buyer's Closing Documents. At Closing, Buyer shall deliver the following documents ("Buyer's Closing Documents") to Seller:

11.1.      Authorizing Resolutions. Certificates of such resolutions of Buyer in form and content as Seller or the Title Company may reasonably request authorizing the entering into and execution of this Contract and the consummation of the transaction herein contemplated.

11.2.     Assignment of Leases. Buyer shall execute the Assignment of Lease as more particularly described in Section 10.4 herein.

11.3.     General Assignment. Buyer shall execute the General Assignment as more particularly described in Section 10.5 herein.

11.4.     Closing Statement. Buyer shall execute the Closing Statement.

11.5.     Easements. Buyer shall execute each of the Easements.

12.           Closing Procedure. The Closing shall proceed in the following manner:

12.1.     Pre-Closing Delivery of Documents. Buyer's Attorney and Seller's Attorney shall each deliver to the other copies of the proposed Buyer's Closing Documents and  Seller's Closing Documents not less than five (5) days prior to the Closing Date.

12.2.     Transfer of Funds. Buyer shall pay the Cash to Close to Escrow Agent by wire transfer to a depository designated by Escrow Agent.

12.3.     Delivery of Documents. Buyer shall deliver Buyer's Closing Documents, and Seller shall deliver Seller's Closing Documents, to Escrow Agent.

12.4.     Disbursement of Funds and Documents. Once the Title Company has "insured the gap," i.e., endorsed the Title Commitment to delete the exception for matters appearing between the effective date of the Title Commitment and the effective date of the Title Policy, and provided all other obligations to close have been fulfilled, Escrow Agent shall disburse the Deposit, Cash to Close, and Buyer's Closing Documents to Seller, and the Seller's Closing Documents to Buyer.

13.           Prorations and Closing Costs.

13.1.     Prorations. The following items shall be prorated and adjusted between Seller and Buyer as of the midnight preceding the Closing Date, except as otherwise specified:

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             13.1.1. Taxes. Real estate and personal property taxes shall be prorated based on amounts for the current year with maximum discount taken, except that if tax amounts for thecurrent year are not available, prorations shall be made based upon the taxes for the preceding year, with maximum discount taken. With respect to any pending challenges to assessments on the Land, for the year in which the Closing occurs, the same shall not be settled without Buyer's prior written consent, such consent not to be unreasonably withheld or delayed, and with respect to any challenge applicable to the tax year in which the Closing occurs. Following Closing, Buyer shall have the right to take control of such proceeding and Seller shall cooperate with Buyer in connection therewith provided that Buyer shall not settle such proceedings without Seller's prior written consent, such consent not to be unreasonably withheld or delayed. Any refunds of taxes relating to the tax year in which the Closing occurs shall first be applied to pay the costs incurred in achieving such refund, and the balance shall be prorated between Buyer and Seller.

            13.1.2. Pending and Certified Liens. Subject to the limitations set forth in Section 5.4.1 hereof, certified liens levied by any Governmental Authority for which the work has been substantially completed and which are currently due and payable in full shall be paid by the Seller, and Seller may use all or any portion of the Cash to Close to pay off or satisfy such liens concurrently with Closing. Pending liens and certified liens levied by any Governmental Authority which are payable on an installment basis such as monthly, semi-annually, annually or bi-annually or for which the work has not been substantially completed shall be assumed by the Buyer.

            13.1.3. Utilities. Water, sewer, electricity, gas and other utility charges, if any, shall be prorated on the basis of the fiscal period for which assessed, except that if there are utility meters for the Property, apportionment at the Closing shall be based on the last available reading, if possible. If there is a water meter on the Property, the Seller shall furnish, at the Closing or as soon thereafter as practicable, a reading to a date not more than thirty (30) days prior to the Closing Date, and the unfixed meter charge, the unfixed sewer rent and/or unfixed water charges, if any, based thereon for the intervening time shall be apportioned on the basis of such last reading, subject to adjustment upon receipt of the actual meter charge and sewer rent. Seller shall notify the utility companies servicing the Property prior to Closing, or as soon thereafter as practicable, that billing to Seller for such utilities shall be discontinued at the end of the day preceding the Closing Date, and Buyer shall arrange with such utilities to have such billings for utility services charged to Buyer from and after the Closing Date and Seller shall be entitled to the refunds of all deposits therefore.

 13.1.4. License and Permit Fees. License and permit fees shall be prorated only if the respective license or permit is transferable to Buyer.

 13.1.5. Security Deposit. The amount of security deposit held by Seller under the Lease shall be credited to Buyer by Seller.

 13.1.6. Rent. Rent and any other amounts payable by the Tenant under the Lease shall be prorated as of the Date of Closing and adjusted against the Purchase Price.

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13.1.7. Service Contracts. All charges and prepayments relating to the Service Contracts shall be separately accounted for as between Seller and Buyer as of 12:01a.m. on the Closing Date with Buyer receiving a credit for all amounts due with respect to any periods prior to the Closing Date.

 13.1.8. Other Items. All other items required by any other provision of this Contract to be prorated or adjusted or, absent express reference thereto in this Contract items normally prorated in the county where the Property is located, shall be prorated in accordance with the standards prevailing in the county in which the Land is located.

13.2.     Prorations Final. At the Closing, the above-referenced items shall be prorated and adjusted as indicated and except as otherwise expressly provided, all such prorations or adjustments shall be final.

13.3.     Seller's Closing. Seller shall pay for the following items prior to or at the time of Closing: (i) Documentary stamps on Deed, (ii) Documentary stamp surtax on Deed, (iii) Certified and pending municipal special assessment liens for which the work has been substantially completed, (iv) cost to cure any Optional Additional Exceptions which Seller elects to cure, in its discretion and (v) Mandatory Additional Exceptions.

13.4.     Buyer's Closing Costs. Buyer shall pay for the following items prior to or at the time of Closing: (i) Recording of the Deed and the Easements, (ii) Pending special assessment liens for which the work has not been substantially completed, (iii) Title Commitment, (iv) Title Policy, (v) sales tax on the transfer of Personal Property (it being understood that no portion of the purchase price is allocated to Personal Property), and (vi) Survey.

14.           Possession. Buyer shall be granted full possession of the Property at Closing, subject to the Easements, the Permitted Exceptions, and Tenants under the Lease.

15.           Risk of Loss.

15.1.     Casualty. Seller shall bear all risk of loss occurring to or upon any portion of the Property prior to conveyance thereof by Seller to Buyer pursuant to the terms of this Contract.

15.2.     Condemnation. If at any time prior to the Closing Date, any proceedings shall be commenced for the taking of all of the Property or any material portion thereof, for public or quasi-public use pursuant to the power of eminent domain, Seller shall furnish Buyer with written notice of any proposed condemnation within five (5) days after Seller's receipt of such notification, but in no event later than the Closing. In such event, and provided that Buyer is not otherwise in default under this Contract Buyer shall have the option to terminate this Contract within fifteen (15) days after receipt by Buyer of notice thereof from Seller by written notice to Seller and the Escrow Agent. Should Buyer terminate this Contract, the Deposit shall immediately be returned to Buyer, and thereafter neither Buyer nor Seller shall have any further rights or obligations hereunder except as otherwise expressly provided herein.

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If Buyer does not elect to terminate within the required time, then (i) the Closing shall progress as herein provided without reduction of the Purchase Price; (ii) Buyer shall have the right to participate in the negotiation of any condemnation awards or other compensation for taking, and (iii) Seller shall assign unto Buyer any and all awards and other compensation for such taking to which it would be otherwise entitled as owner of the Property and Seller shall convey such of the Property, if any, which remains after the taking.

16.           Default.

16.1.      Buyer's Default. In the event that this transaction fails to close due to a default on the part of Buyer, which default has not been cured within five (5) days of receipt by Buyer of notice of such default (except with respect to the failure to timely make any Deposit or failure to close on the Closing Date, for which there shall be no cure period), the Deposit made or agreed to be made by Buyer shall be paid to the Seller as agreed-upon liquidated damages and thereafter, except as otherwise specifically set forth in this Contract, neither Buyer nor Seller shall have any further obligation under this Contract. Buyer and Seller acknowledge that if Buyer defaults, Seller will suffer damages in an amount which cannot be ascertained with reasonable certainty on the Effective Date and that the Deposit to be paid to Seller most closely approximates the amount necessary to compensate Seller in the event of such default. Buyer and Seller agree that this is a bona fide liquidated damages provision and not a penalty or forfeiture provision.

16.2.     Seller's Default. In the event that this transaction fails to close due to a default on the part of Seller (other than Seller's failure to convey marketable title to the Land as provided herein), which default has not been cured within five (5) days of receipt by Seller of notice of such default, Buyer shall have the right to either (i) terminate the Contract and receive back the Deposit (less the Independent Consideration), in which event the parties shall be released from any and all liability under this Contract, except as otherwise expressly provided herein, or (ii) seek specific performance of Seller's obligations hereunder, with the Deposit remaining in escrow pending the outcome of such proceedings. If, however, specific performance is not available to Buyer due to an intentional default by the Seller where Seller has contracted to sell or conveyed the Property to a third party, Buyer shall have the right to recover from Seller all losses, costs, damages, liabilities, and expenses, including, without limitation, reasonable counsel fees, incurred by Buyer as a result of such default by Seller and the failure of the transaction contemplated herein to close in accordance with the provisions of this Contract.

17.           Brokerage Commission. Seller represents and warrants to Buyer and Buyer represents and warrants to Seller that Broker is the only real estate broker engaged with respect to this transaction, (including the ROFO and the ROFR, as hereinafter discussed) that Broker has been engaged pursuant to a separate agreement with Seller, and that no other broker or finder has been engaged by Buyer or Seller with respect to this transaction. Seller and Buyer agree to indemnify and hold each other harmless from any and all claims for any other brokerage fees or similar commissions asserted by brokers or finders claiming by, through or under the indemnifying party. Seller agrees to pay Broker its full commission in an amount equal to one and one-half percent (1.5%) of the Purchase Price upon Seller's receipt of the Purchase Price as a result of the consummation of the sale contemplated hereunder. Notwithstanding anything to the contrary set forth in this Contract, the provisions of this Section shall survive the Closing or earlier termination of this Contract as expressly provided herein.

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18.          Notices. Any notice, request, demand, instruction or other communication to be given to either party hereunder, except where required to be delivered at the Closing, shall be in writing and shall either be (i) hand-delivered, (ii) sent by Federal Express or a comparable overnight mail service, or (iii) mailed by U.S. registered or certified mail, return receipt requested, postage prepaid, or (iv) sent by telephone facsimile or e-mail transmission, provided that an original copy of the transmission shall be mailed by regular mail, to Buyer, Seller, Buyer's Attorney, Seller's Attorney, and Escrow Agent, at their respective addresses set forth in Exhibit "B" to this Contract. Notice shall be deemed to have been given upon receipt or refusal of delivery of said notice. The addressees and addresses for the purpose of this paragraph may be changed by giving notice. Unless and until such written notice is received, the last addressee and address stated herein shall be deemed to continue in effect for all purposes hereunder.

19.           Escrow Agent. The escrow of the Deposit shall be subject to the following provisions:

 19.1.        Duties and Authorization. The payment of the Deposit to the Escrow Agent is for the accommodation of the parties. The duties of the Escrow Agent shall be determined solely by the express provisions of this Contract. The parties authorize the Escrow Agent, without creating any obligation on the part of the Escrow Agent, in the event this Contract or the Deposit becomes involved in litigation, to deposit the Deposit with the clerk of the court in which the litigation is pending and thereupon the Escrow Agent shall be fully relieved and discharged of any further responsibility under this Contract. The undersigned also authorize the Escrow Agent, if it is threatened with litigation, to interplead all interested parties in any court of competent jurisdiction and to deposit the Deposit with the clerk of the court and thereupon the Escrow Agent shall be fully relieved and discharged of any further responsibility hereunder.

19.2.      Liability. The Escrow Agent shall not be liable for any mistake of fact or error of judgment or any acts or omissions of any kind unless caused by its willful misconduct or gross negligence. The Escrow Agent shall be entitled to rely on any instrument or signature believed by it to be genuine and may assume that any person purporting to give any writing, notice or instruction in connection with this Contract is duly authorized to do so by the party on whose behalf such writing, notice, or instruction is given.

19.3.     Indemnification. Buyer and Seller will, and hereby agree to, jointly and severally, indemnify the Escrow Agent for and hold it harmless against any loss, liability, or expense incurred without gross negligence or willful misconduct on the part of the Escrow Agent arising out of or in connection with the acceptance of, or the performance of its duties under, this Contract, as well as the costs and expenses of defending against any claim or liability arising under this Contract. This provision shall survive the Closing or earlier termination of this Contract

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19.4.     Seller's Attorney. Buyer acknowledges that the Escrow Agent is also Seller's Attorney in this transaction, and Buyer hereby consents to the Escrow Agent's representation of Seller in any litigation which may arise out of this Contract.

20.           Assignment and Transfer. This Contract shall not be assigned by Buyer except to any entity in which Buyer maintains control.

21.           Boulevard Shops. Seller hereby discloses that the Improvements known as the "Boulevard Shops" located on that portion of the Land identified as "Lot D" may have been designated as an historic structure. Seller makes no representations or warranties as to the ability of Buyer or any successor owner to use, renovate, demolish, finance or occupy the Boulevard Shops.

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22.           Miscellaneous.

22.1.     Landscaping of 14^th Street Circle. Seller has previously agreed with the owners of that certain property known as the Performing Arts Center, to landscape and pave a portion of the land lying in the intersection of N.E. 14^th  Street and N.E. Bayshore Drive, as further outlined on Exhibit "K" attached hereto (the "14^th Street Circle"). Part of the landscaping has been completed by Seller. Buyer agrees to complete the landscaping and paving of the 14^th Street Circle at Buyer's sole cost and expense upon substantial completion of the Performing Arts Center; provided, however, that following Closing, that to the extent Buyer is able to reduce the area to be landscaped in accordance with all applicable agreements and laws to which Buyer is taking subject to or by reason of the modification of any such agreements with the consent of the other parties thereto whose consent is required, Buyer's obligation hereunder shall be correspondingly reduced. This provision of the Contract shall survive the Closing of this transaction and shall be included as a covenant in the Deed.

22.2.     Miami Herald Operations. Buyer recognizes and acknowledges that Seller, or a subsidiary of Seller, is the owner of the property adjacent to the Land, which property is more commonly known as the Miami Herald Building. Buyer and Seller acknowledge and agree that (i) Seller intends to continue to operate the property adjacent to the Land and commonly known as the Miami Herald Building as the headquarters and operations center of the Miami Herald and (ii) Buyer is purchasing the Land with the intention of constructing and operating thereon a new mixed-use office/retail/residential complex. Buyer and Seller shall reasonably cooperate with one another so as to accommodate to the extent practicable both the ongoing uninterrupted operations and uses of the Miami Herald Building (including the continuing operation of satellite dishes or communication dishes located or to be located on the roof thereof) for its current uses and the proposed construction, development and operation (and residential occupancy) of the contemplated, new, mixed-use development on the Land. Prior to Buyer submitting its development plans to the applicable governmental authorities, Buyer shall provide to Seller copies of Buyer's site plan for the Land for Seller's review and good faith input (however Seller's approval shall not be required).

22.3.     Buyer's Development of the Property. Seller acknowledges that Buyer shall be developing the Property as a mixed use project and will be applying for Major Use Special Permits and other permits in connection with such development (the "Approvals"). Seller agrees to reasonably cooperate with Buyer (at no cost to Seller) in obtaining the Approvals and further agrees not to oppose or otherwise interfere with Buyer's proposed development of the Property subject however, to Seller's rights to continue its operations on the adjacent land as described in paragraph 22.2 herein; and to the extent that the Easements required herein have been executed and recorded.

22.4.            Amendment. No modification or amendment of this Contract shall be of any force or effect unless in writing executed by both Seller and Buyer.

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22.5.     Attorneys' Fees. Each of the parties hereto shall bear its own costs and Attorneys' Fees in connection with the execution of this Contract and the consummation of the transaction contemplated hereby. In the event of any dispute hereunder, the prevailing party shall be entitled to recover all costs and expenses incurred by it in connection with the enforcement of this Contract, including all Attorneys Fees.

22.6.      Confidentiality. Buyer, for itself and on behalf of its officers, directors, employees, agents and other representatives, agree to maintain all information, operating reports, and other matters delivered to Buyer by Seller hereunder in the strictest confidence, except to the extent such matters are part of the public record; provided, however, that Buyer may disclose such information to potential equity investors and lenders, attorneys and accountants, as it deems reasonably necessary. Buyer acknowledges that such information contains confidential business information and that such information is being delivered at Buyer's request with the understanding that in no event shall any such information constitute a representation of Seller. Buyer agrees that such information will not be used except for the sole purpose of evaluating the Property for possible acquisition thereof, and that such information shall be kept in strict confidence. Further, Buyer will take such precautions, and will instruct each of its representatives and agents to take such precautions as are reasonably necessary to keep all such information confidential, to control such information so that it may all be returned to Seller in the event this Contract is terminated for any reason, and to restrict such information to Buyer and its representatives. Seller discloses to Buyer that, to the extent any of such information contains forecasts, such forecasts have been prepared on the basis of assumptions and hypotheses and that forecasts of future operating results are difficult to predict. Accordingly, there is a material risk attendant to Buyer's reliance on such forecasts and any other materials relating to forecasts comprising a part of the information delivered hereunder.

22.7.     Computation of Time. Any reference herein to time periods of less than six (6) days shall exclude Saturdays, Sundays and legal holidays in the computation thereof. Any time period provided for in this Contract which ends on a Saturday, Sunday or legal holiday shall extend to 4:00 p.m. Eastern time in effect on the next full Business Day.

22.8.     Construction of Agreement. Should any provision of this Contract require interpretation in any judicial, administrative or other proceeding or circumstance, it is agreed that the court, administrative body, or other entity interpreting or construing the same shall not apply a presumption that the terms thereof shall be more strictly construed against one party by reason of the rule of construction that a document is to be construed more strictly against the party who prepared the same, it being further agreed that both parties hereto have fully participated in the preparation of this Contract.

22.9.     Counterparts. This Contract may be executed in any number of counterparts, any one and all of which shall constitute the contract of the parties and each of which shall be deemed an original.

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22.10.   Entire Agreement. This Contract sets forth the entire agreement between Seller and Buyer relating to the Property and all subject matter herein, and supersedes all prior and contemporaneous negotiations, understandings and agreements, written or oral, between the parties, and there are no agreements, understandings, warranties, representations among the parties except as otherwise indicated herein.

22.11.   Gender. As used in this Contract, the masculine shall include the feminine and neuter, the singular shall include the plural and the plural shall include the singular as the context may require.

22.12.   Governing Law. This Contract shall be interpreted in accordance with the internal laws of the State of Florida both substantive and remedial, regardless of the domicile of any party, and will be deemed for such purposes to have been made, executed and performed in the State of Florida; provided, however, Seller and Buyer do not waive any defenses, rights, remedies, privileges or other matters available under federal law or otherwise.

22.13.   Best Knowledge; Received Written Notice. Whenever a representation, warranty or other statement is made in this Contract, or in any document or instrument to be delivered at Closing pursuant to this Contract, on the basis of the best knowledge of Seller or is qualified by Seller's having received written notice, such representation, warranty or other statement is made with the exclusion of any facts disclosed to or otherwise known by Buyer and is made solely on the basis of the actual knowledge of the vice president of production, as distinguished from implied, imputed or constructive, knowledge on the date that such representation, warranty or other statement is made, without inquiry or investigation or duty thereof. As of the date hereof the vice president of production is Larry Marbert and he has held such position for approximately 6 years.

22.14.   Radon Gas. Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing maybe obtained from your county public health unit.

22.15.   Recording. Neither this Contract nor any portion thereof nor memorandum relating hereto shall be placed of record by any party to this Contract.

22.16.   Section and Paragraph Headings. The section and paragraph headings herein contained are for the purposes of identification only and shall not be considered in construing this Contract.

22.17.   Severability. Should any clause or provision of this Contract be determined to be illegal, invalid or unenforceable under any present or future law by final judgment of a court of competent jurisdiction, the remainder of this Contract will not be affected thereby. It is the intention of the parties that if any such provision is held to be illegal, invalid or unenforceable, there will be added in lieu thereof a legal, valid and enforceable provision that is as similar as possible in terms to the illegal, invalid or unenforceable provision.

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22.18.   Successors and Assigns. This Contract shall inure to the benefit of and be binding upon the permitted successors and assigns of the parties hereto.

22.19.   Survival. Except as otherwise expressly set forth in this Contract including, without limitation, Section 7.2, all representations and warranties of Seller and obligations of Seller hereunder set forth in this Contract shall not survive the Closing, but shall merge into the Closing and the delivery of the Deed.

22.20.   Time of the Essence. Time is of the essence in the performance of all obligations by Buyer and Seller under this Contract.

22.21.   Publicity.  All notices to third parties and all other publicity concerning the transaction contemplated hereby shall be jointly planned and coordinated by and between Buyer and Seller. None of the parties shall act unilaterally in this regard without the prior written approval of the other; however, this approval shall not be unreasonably withheld. Notwithstanding any of the foregoing, Seller shall, without the consent of the Buyer, have the right to file any and all notices required for regulatory purposes, including, but not limited to, the filing of a Form 8-K acknowledging this transaction with the Security and Exchange Commission.

22.22.   Tax Protest. If, as a result of any tax protest or otherwise any refund or reduction of any real property or other tax or assessment relating to the Property during the period for which, under the terms of the Contract, Seller is responsible, Seller shall be entitled to receive or retain such refund or the benefit of such reduction, less equitable prorated costs of collection; however, for the year in which Closing occurs, such refunds or reductions shall be prorated between the parties.

22.23.   1031 Exchange. Buyer shall cooperate with Seller in effecting a 1031 exchange under Section 1031 of the Internal Revenue Code, so long as neither Buyer nor the Property incur any expense or liability in connection herewith.

22.24.   Grant of Right of First Refusal. Seller hereby grants to Buyer, effective as of the date hereof, a right of first refusal (as fully described below) for the purchase of Seller's adjacent property known as the Herald Office Building and Seller's adjacent property known as the Printing Plant (collectively the "Miami Herald Building Site"). Notwithstanding anything to the contrary, the Buyer's right of first refusal for the Herald Office Building and the Printing Plant (no matter when such right is triggered) shall terminate upon the sooner of (a) twenty (20) years after the date of Closing (except to the extent theretofore exercised) or (b) the termination, without a Closing, of this Contract.

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                 22.24.1  Buyer's right of first refusal for the Herald Office Building and/or Printing Plant shall come into existence as described hereinabove, and shall be exercised as follows:

             In the event that Seller receives a bona fide offer in the form of an executed letter of intent accompanied by a 5% soft deposit to be held in escrow by an escrow agent acceptable to Seller and such third party purchaser (an "Offer") to purchase the Herald Office Building and/or the Printing Plant, from a purchaser unrelated to Seller, and if Seller is willing to sell the property described in the Offer upon the terms set forth therein (which terms shall include the purchase price, hard and soft deposits, inspection period, financing conditions, other conditions to such offer to purchase becoming effective and closing date), Buyer shall have a right of first refusal to purchase the property set forth in the Offer upon the identical terms set forth in the Offer, except that the purchase price set forth in the Offer shall be increased by 5%.

            Upon Seller's receipt of an Offer which Seller wishes to accept and further receipt of a refundable deposit for such Offer, Seller shall provide Buyer and Buyer's Attorney with a copy of the Offer. Buyer shall have a period of thirty (30) calendar days after receipt of an Offer to submit to Seller a contract containing the same terms and conditions and covering the same property as the Offer (except Buyer's contract shall contain a purchase price equal to 5% greater than the purchase price contained in the Offer), accompanied by an earnest money deposit in the same amount as the deposit accompanying the Offer.

            In the event that (a) Buyer elects not to submit a contract for the purchase of the property described in the Offer, (b) Seller accepts the Offer, and (c) Seller subsequently agrees to modify any material provision of the Offer, such modification in the Offer term ("Modified Offer") shall reactivate Buyer's right of first refusal with respect to the Modified Offer. Seller shall be required to submit the Modified Offer to Buyer, and Buyer shall have a period of ten (10) calendar days after receipt thereof to submit to Seller a contract containing the same terms and conditions as the Modified Offer, plus 5%.

            In the event that Buyer elects not to submit a contract for the purchase of the property described in the Offer or any Modified Offer within thirty (30) calendar days after receipt of such Offer from Seller, Buyer shall be deemed to have waived its right of first refusal with respect to the Offer, and provided that Seller closes with the purchaser in accordance with the Offer, Buyer's right of first refusal shall be terminated as to the property sold and conveyed in accordance with the Offer.

             In the event that (a) Buyer elects not to submit a contract for the purchase of the property described in the Offer within the thirty (30) calendar day period provided, (b) Seller accepts the Offer, and (c) Seller fails to close on the sale of the property in accordance with the Offer, Buyer shall continue to have a right of first refusal with respect to the property described in the Offer.

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            In the event that an Offer submitted to Seller, which Seller wishes to accept, includes as part of the purchase price consideration other than cash (e.g. real estate or securities), and in the event that Buyer wishes to exercise its right to purchase in accordance with the Offer, Buyer and Seller agree that Buyer may pay the non-cash portion of the consideration set forth in the Offer in cash.

            In the event that Seller sells and conveys the Herald Office Building or Printing Plant or any portion thereof to a purchaser other than an unrelated bona fide third party purchaser, Buyer shall continue to have a right of first refusal with respect to the Herald Office Building or Printing Plant. To the extent that Seller simultaneously presents the Right of First Refusal to Buyer for both the Printing Plant and the Herald Office Building, then Buyer may not exercise any of its rights to purchase one property without the other.

            At the Closing, Seller shall execute and deliver to Buyer a Notice of Right of First Refusal in the form attached hereto as Exhibit "K", which Notice shall be recorded in the Public Records of Miami Dade County. Buyer and Seller shall also execute and deliver to the Title Company a Termination of the Right of First Refusal, to be held in escrow by the Title Company until such time as the Title Company receives notice from both Buyer and Seller to record such Termination.

23.           Rezoning of Miami Herald Building. The parties acknowledge that the land upon which the Miami Herald Building Site is located is currently zoned C-2. Buyer hereby agrees to use its commercially reasonable efforts, at its sole cost and expense, to take all necessary action to cause the zoning for the Miami Herald Building Site to be reclassified from C-2 to SD-6 (the "Zoning Change"). However, any conditions or restrictions placed on the Miami Herald Building Site by any governmental authorities by virtue of the Zoning Change shall be approved by Seller, such approval not to be unreasonably withheld or delayed, prior to finalizing such Zoning Change. Whether or not Buyer is successful in obtaining such Zoning Change, Seller agrees that, for so long as it owns the Miami Herald Building Site, it shall not develop or improve the Miami Herald Building Site in any manner that would increase the height of the current improvements located on the Miami Herald Building Site. However, this restriction shall not include the placing of satellite dishes, antennas or other such items on the roof of the Miami Herald Building. If Buyer is provided with a Seller's Notice of Offer but fails to accept such offer, and if Buyer fails to exercise its Right of First Refusal, both as provided for hereinabove, then Seller may sell the Miami Herald Building Site to a third party, or develop the Miami Herald Building Site free from any of the restrictions set forth in this Section 23, but subject, however, to Section 24 herein below. Notwithstanding anything provided herein to the contrary, all development on the Miami Herald Building Site and on the Printing Plant Site shall remain subject to the restrictions set forth in Section 24 herein below. This provision shall survive the Closing and shall be recorded in the public records of Miami-Dade County as a restrictive covenant against the Miami Herald Building Site and the Printing Plant at Closing.

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24.           Deviation from MUSP. Notwithstanding anything set forth in Section 23 or in thisContract to the contrary, under no circumstance shall the Seller, Buyer or any third party purchaser develop the Miami Herald Building Site or the Printing Plant Site or any portion thereof in a manner inconsistent with or which deviates by more than 5% (with respect to either density or intensity but not location) from the final, non appealable Major Use Special Permits ("MUSP"), which MUSP shall be applied for and obtained by the Buyer at Buyer's sole cost and expense and until such MUSP is effective, no development in excess of what currently exists on the Miami Herald Site or the Printing Plant site shall take place. Seller agrees, at no cost to Seller, to reasonably cooperate with Buyer in obtaining final approvals for the MUSP including, without limitation, executing any documents or instruments reasonably required by Buyer. The MUSP shall provide for a reasonable commercial development on the Miami Herald Building Site, subject to municipal approvals, with a minimum 700,000 square feet of improvements (in addition to onsite parking to accommodate such improvements) to be built on the Miami Herald Building Site. The MUSP shall further provide that there will be no increase in the height of the improvements located on the Printing Plant site from the present height of the Printing Plant Site. This restriction shall be recorded in the public records of Miami-Dade County against the Herald Office Building and the Printing Plant, and may be removed or modified only if both Buyer and Seller mutually agree in writing to remove or modify such restrictions. This provision shall survive the Closing.

25.           Telecopied or E-Mailed Signatures. To expedite the execution and effectiveness of this Contract, telecopied or e-mailed signatures may be used in place of original signatures. Seller and Buyer intend to be bound by the signatures on the telecopied or e-mailed document, are aware that the other party will rely on the telecopied or e-mailed signatures, and hereby waive any defenses to the enforcement of the terms of this Contract based upon the telecopied or emailed signatures.

26.           Waiver of Trial by Jury. SELLER AND BUYER HEREBY KNOWINGLY, IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED ON THIS CONTRACT OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS CONTRACT OR ANY DOCUMENT OR INSTRUMENT EXECUTED IN CONNECTION WITH THIS CONTRACT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTION OF ANY PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR SELLER AND BUYER ENTERING INTO THE SUBJECT TRANSACTION.

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IN WITNESS WHEREOF, the parties have executed this Contract as of the dates indicated below.

SELLER:

THE MIAMI HERALD PUBLISHING COMPANY, a Florida corporation

By: /s/ Alice Wang

Alice Wang, Vice President

Date: March 3, 2005

RICHWOOD INC., a Florida corporation

By: /s/ Alice Wang

Alice Wang, Vice President

Date: March 3, 2005

KNIGHT RIDDER, INC., a Florida corporation

By: /s/ Stephen B. Rossi

Stephen B. Rossi, Senior VP and CFO

Date: March 3, 2005

BUYER:

CITISQUARE GROUP, LLC, a Florida liability company

By: /s/ P.A. Martin

P.A. Martin, Manager

Date: March 3, 2005

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ESCROW AGENT: (as to only those Sections of the Contract pertaining to the Escrow Agent's rights and responsibilities):

Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.

By: /s/ Chava Genet

Chava Genet, Esq.

BROKER: (as to only those Sections of the Contract pertaining to the Broker's

commission):

Laquer Corporate Realty Group, Inc.

By: /s/ Edie Laquer

Edie Laquer, Owner/Manager

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EX-99.1 CHARTER

FIRST AMENDMENT TO CONTRACT FOR PURCHASE

AND SALE OF REAL PROPERTY

This First Amendment to Contract for Purchase and Sale of Real Property (the "First Amendment") is made and entered into as of the 10th day of August, 2007, by and between RICHWOOD, INC., a Florida corporation (“Richwood”) and The McClatchy Company, a Delaware corporation (“McClatchy”, and together with Richwood, hereinafter collectively referred to as the "Seller"), and CITISQUARE GROUP, LLC, a Florida limited liability company (the "Buyer").

W I T N E S S E T H:

           WHEREAS, Richwood, Miami Herald Publishing Company, a Florida corporation (“MHPC”) and Knight-Ridder, Inc., a Florida corporation (collectively, the “Original Sellers”), and Buyer entered into that certain Contract for Purchase and Sale of Real Property effective as of March 3, 2005 (the “ Existing Contract”, as modified by this First Amendment being herein called, the “Amended Contract”) pursuant to which Original Seller agreed to sell to Buyer and Buyer agreed to buy from Original Seller certain real estate located in Miami-Dade County, Florida as more particularly described therein (the “Herald Property”); and

           WHEREAS, following the Effective Date of the Existing Contract, Original Sellers represented and warranted to Buyer that the Miami Herald Publishing Company did not own any of the Herald Property but in fact Knight-Ridder, Inc. actually owned, together with other portions of the Herald Property, all the Herald Property which previously was thought to be owned by the Miami Herald Publishing company, less that certain portion of the Herald Property owned by Richwood.  As a result thereof, Miami Herald Publishing Company is no longer an owner or seller of the Herald Property.

           WHEREAS, on June 27, 2006, Articles of Merger were filed between The McClatchy Company and Knight-Ridder, Inc., which effectuated a merger between the two companies, wherein Knight-Ridder, Inc. merged with and into McClatchy, resulting with McClatchy as the surviving corporation.

           WHEREAS, Buyer and Seller have agreed to modify certain provisions of the Existing Contract on the terms and conditions set forth herein.

           NOW THEREFORE, in consideration of Ten Dollars ($10.00) and the mutual promises contained herein, the receipt, sufficiency and adequacy of which is hereby acknowledged, the parties hereto agree as follows:

1. Recitals. The above recitals are true and correct and incorporated herein by reference as if set forth in full.

2. Capitalized Terms. Any capitalized terms herein and not otherwise defined shall have the same meanings as described to them in the Existing Contract.

3. Seller.   Any reference to Sellers in the Existing Contract shall now only refer to Richwood and McClatchy.

4.  Closing Date.  Section 1.2 of the Existing Contract is deleted in its entirety, and in lieu thereof, shall be replaced with the following:

“The Closing shall be December 31, 2008, or such other date as provided by this Contract”.

5.   Release of Deposit.  The following shall be added to Section 3.1 of the Existing Contract:

“Notwithstanding the foregoing, immediately upon execution of this First Amendment by Seller and Buyer, Escrow Agent shall disburse the Deposit (exclusive of interest) to the Seller.  The Escrow Agent shall also disburse all interest earned on the Deposit up until the time of such disbursement to the Buyer.  Upon making such payments, the Escrow Agent shall be released of any and all liability with respect to the holding of the Deposit.  Notwithstanding the release of the Deposit to Seller, the full amount thereof shall remain a credit against the Purchase Price and Buyer’s “Cash to Close” under the Amended Contract to the same extent as if it had remained in escrow with Escrow Agent pursuant to the terms of the Existing Contract.  In addition, Seller shall have an obligation to return such Deposit to Buyer in the event of a termination of the Amended Contract under the same circumstances under which Escrow Agent would have been directed or obligated to return such Deposit to Buyer under the terms of the Amended Contract had the Deposit remained in escrow as originally provided.”

6.   Additional Deposits.  The following shall be added as Section 3.1.1 to the Contract:

“Additional Deposits:  Buyer shall pay to Seller five (5) additional deposits (each an “Additional Deposit”), all of which, if the Buyer should perform its obligations under the Contract and close on the purchase of the Property, shall be credited against the Purchase Price at Closing and Buyer’s required “Cash to Close” under the Amended Contract to the same extent as if said monies had been deposited or remained in escrow, as applicable, with Escrow Agent pursuant to the terms of the Existing Contract. In addition, Seller shall have an obligation to return all such Additional Deposits so made, together with the Deposit, to Buyer in the event of a termination of the Amended Contract under the same circumstances under which Escrow Agent would have been directed to return the Deposit to Buyer under the terms of the Amended Contract had such Deposit remained in escrow as originally provided. The Additional Deposits shall be paid to Seller on the following dates and in the following amounts, provided Seller is not in breach in any material respect of its obligations under the terms of the Amended Contract, and is not the subject of any so-called bankruptcy or insolvency proceeding under state or federal insolvency laws:

on or before 5:00pm EDT on October 1, 2007:  $5,000,000.00

on or before 5:00pm EDT on January 1, 2008: $5,000,000.00

on or before 5:00pm  EDT on April 1, 2008:  $5,000,000.00

on or before 5:00pm EDT on July 1, 2008: $5,000,000.00

on or before 5:00pm EDT on October 1, 2008: $5,000,000.00

Notwithstanding the foregoing, Buyer may, at its election, upon written notice (“Deferral Notice”) to Seller prior to October 1, 2007, postpone the payment of the Additional Deposit due on October 1, 2007 (the “First Additional Deposit”) to a date on or before December 1, 2007, (“Deferral Date”), which such Deferral Date shall be specified in the Deferral Notice; provided, that Buyer shall pay to Seller on the Deferral Date such First Additional Deposit together with interest thereon at a rate of 10% per annum which shall have accrued from October 1, 2007 to the Deferral Date; and provided further, that Buyer may, at any time prior to the Deferral Date specified in the Deferral Notice, upon not less than one Business Day notice to Seller, pay to Seller the First Additional Deposit together with interest thereon at a rate of 10% per annum which shall have accrued from October 1, 2007 to the date Seller makes such payment.

It shall be a default of Buyer under the Amended Contract if Buyer shall fail to pay any Additional Deposit when due and such default shall continue for two (2) Business Days after written notice of such default is given by Seller to Buyer (an “Event of Default”).  Upon such Event of Default, Seller may elect to terminate the Amended Contract and retain all deposits that have been previously paid to Seller as liquidated damages, both Buyer and Seller acknowledging that the Additional Deposits that have been paid to Seller most closely approximate the amount necessary to compensate Seller in the event of such Event of Default.  Buyer and Seller agree that this is a bona fide liquidated damages provision and not a penalty or forfeiture provision.

Buyer acknowledges that the Additional Deposits are being paid directly to Seller, and may be commingled with other funds of Seller. At no time shall the Additional Deposits be placed in escrow and therefore, there shall be no interest accruing at any time on any or all of the Additional Deposits.”

7. Acceleration of Closing Date.   Buyer may, upon 10 days prior written notice to Seller, elect to close on the purchase of the Herald Property prior to the Closing Date.  In the event Buyer closes on or before June 30, 2008, Buyer shall receive a reduction in the Purchase Price in an amount equal to Ten Million and 00/100 Dollars ($10,000,000.00) such that the Purchase Price payable under the Contract shall be One Hundred Eighty Million Dollars ($180,000,000) (the “180 Million Dollar Price”); as such date may be extended by reason of Seller adjourning the Closing in accordance with the terms of the Amended Contract, or Seller failing to satisfy the conditions to Closing as or before such date, or Seller defaulting on its obligation to close on or before such date in which event the 180 Million Dollar Price shall still apply. In the event Buyer closes on or before September 30, 2008, Buyer shall receive a reduction in the Purchase Price in amount equal to Five Million and 00/100 Dollars ($5,000,000.00) such that the Purchase Price payable under the Contract shall be One Hundred Eighty-Five Million Dollars ($185,000,000) (the “185 Million Dollar Price”); as such date may be extended by reason of Seller adjourning the Closing in accordance with the terms of the Amended Contract, or Seller failing to satisfy the conditions to Closing as or before such date, or Seller defaulting on its obligation to close on or before such date in which event the 185 Million Dollar Price shall still apply.

8. Condition of Property.  Buyer acknowledges that, to the best of its knowledge, as of the date hereof, and except with respect to the Environmental Condition, (which is addressed in Section 13 herein), Seller is not in breach of the Existing Contract, and if Closing were to occur at this time, Buyer would have no basis upon which to declare Seller in breach of the Existing Contract or upon which to direct Escrow Agent to return the Deposit to Buyer.  Seller acknowledges that, to the best of its knowledge, Buyer is not in breach of the Existing Contract, and if the Closing were to occur at this time, Seller would have no basis upon which to declare Buyer in breach of the Existing Contract or upon which to direct Escrow Agent to pay the Deposit to Seller.

9. Truck Staging.  Section 1.5 of the Existing Contract (“Easements”) is hereby modified by deleting the following language:

(i)  an easement to be granted by Buyer to Seller over a portion of the Land described as “Lot C”, and a portion of the Land commonly known as N.E. 14^th Street, in favor of Seller for the use of its trucks and heavy equipment for access, ingress and egress, and the staging of trucks for pickup and delivery of materials (the “Truck Easement”)

and replacing such language in its stead with the following:

(i)  an easement to be granted by Buyer to Seller over a portion of the Land as described on Exhibit “A” hereto, in favor of Seller for the use of its trucks and heavy equipment for access, ingress and egress, and the staging of trucks for pickup and delivery of material (the “Truck Easement”)

10. Parking.  Section 1.5 of the Existing Contract (“Easements”) is hereby modified   by deleting the following language:

 (ii) an easement to be granted by Buyer to Seller for the purpose of parking up to a maximum amount of 740 vehicles, both in a location or locations on the Land to be designated by Buyer and reasonably approved by Seller, as Buyer formulated its development plans for the Land (the “Parking Easement”); provided, however, that upon completion of the construction of all of the improvements on the Land, Purchaser agrees to provide a minimum of 100 parking spaces on that portion of the Land known as Lot A, which is immediately adjacent and proximate to the front lobby entrance of the Herald Office Building (the “Parking Easement”).

 and replacing such language in its stead with the following:

(ii) a perpetual easement in the form attached hereto as Exhibit “H” (“Parking Easement”) or, in lieu thereof, at Buyer’s election, a 99 year lease to be granted by Buyer to Seller in the form attached hereto as “Exhibit I” (“Parking Lease”); provided, however, that if parking on a Permitted Alternative Site (as hereinafter defined) is in place at the Closing, such Parking Easement or Parking Lease shall become effective at Closing, but the term shall commence upon the Parking Structure Completion Date (as defined in the Parking Easement or Parking Lease) and such Parking Easement or Parking Lease shall be recorded at Closing.  With respect to the Permitted Alternative Site, if Buyer does not own the property on which the off-site parking is located, Buyer shall execute a license, easement, lease or other instrument with the third-party operator or owner (and as to which Seller shall be a third party beneficiary) which shall be binding on successors and assigns and which will provide for Seller’s use of the Parking Spaces (as  defined in the Parking Easement or Parking Lease), which may be undesignated to the extent provided in the Parking Easement or Parking Lease, as applicable, for the period reasonably estimated by Buyer until the Parking Structure Completion Date or for such lesser period of time provided that Buyer provides reasonable evidence to Seller of  the availability of other sites to replace such Parking Spaces upon the expiration of such license, easement, lease or other instrument.  In addition to those sites identified on the respective schedules to the Parking Easement and Parking Lease as Permitted Alternative Sites (which Seller acknowledges and agrees are permitted locations for off-site parking), Buyer shall have the right at any time prior to the Parking Structure Completion Date to designate additional alternative sites as Permitted Alternative Sites, which shall be deemed acceptable to Seller if Seller does not object to same within thirty (30) days after notice of such proposed Permitted Alternative Sites is given to Seller (provided, that such notice specifies that failure by Seller to respond to such notice shall be deemed approval of the proposed Permitted Alternative Site).  Any disputes as to whether any proposed parking site qualifies as a Permitted Alternative Site shall be resolved by expedited arbitration by the American Arbitration Association in accordance with its rules for expedited arbitration or any similar organization designated by Buyer and reasonably acceptable to Seller.  “Permitted Alternative Site” is defined collectively as (A) those parking locations identified as Permitted Alternative Sites in the Parking Lease or Parking Easement, (B) those sites agreed upon between Seller and Buyer and (C) those sites determined to be Permitted Alternative Sites by arbitration as heretofore provided.  Upon thirty (30) days notice from Buyer to Seller at any time before or after Closing that a Permitted Alternative Site shall be used for off-site parking until the completion of the Parking Structures (pursuant to the Parking Easement and Parking Lease), such site shall be the location of such alternative parking beginning on the thirty-first (31^st) day after notice is given or at Closing, whichever is later, and the Parking Easement or Parking Lease shall only become effective on the Parking Structure Completion Date. The provisions of this clause (ii) shall survive the Closing.

11. Environmental Liability.  The parties acknowledge that the Seller has been working to complete Seller’s Remedial Obligations as set forth in Exhibit “M” to the Existing Contract.  A disagreement has arisen among the parties concerning whether Seller has satisfied Seller’s Remedial Obligations as set forth in Exhibit “M” to the Existing Contract. Buyer acknowledges that upon the filing by Seller of an application for a legally binding determination of No Further Action with Conditions (“NFA with Conditions”) to be issued and approved by the Miami Dade Department of Environmental Resource Management ("DERM") which application is identical in form and substance to that which was electronically delivered to Buyers on August 8, 2007, (a copy of which is attached hereto as “Exhibit C”), Seller shall have completed Seller’s Remedial Obligations.  Buyer shall thereafter contact and work with DERM directly with respect to the NFA with Conditions, and Buyer’s obligation to close shall be as otherwise required by this Amendment.  Buyer has reviewed the NFA with Conditions and has contacted DERM independently to ascertain the current environmental condition of the Property and upon execution of this Amendment shall be deemed to accept the Property subject only to Seller’s obligations set forth in this paragraph.  If, subsequent to Seller's submission of the request for NFA with Conditions, DERM requires additional remediation or other work on the Property as a condition for issuing an NFA with Conditions, Buyer shall be responsible for completing such work as directed by DERM ("Additional DERM-Required Work"), provided that the Amended Contract has not been terminated.  If the Amended Contract is terminated, Buyer shall have no obligation to Seller or to any third party to (i) conduct any additional DERM-Required Work or (ii) otherwise perform any environmental assessment or remedial activities under federal, state or local law.  To the extent Buyer performs any Additional DERM- Required Work prior to Closing, Seller hereby consents to providing Buyer with reasonable access to the Property as necessary to perform the Additional DERM-Required Work, and Buyer agrees to indemnify Seller for any injury to persons or damage to property arising out of Buyer’s negligence and/or Buyer's intentional wrongful acts and/or Buyer's intentional wrongful omissions in the performance of such additional DERM-Required Work by Buyer in connection with obtaining an NFA with Conditions Letter prior to Closing (it being understood that such indemnification obligations shall survive any termination of the Amended Contract.). Upon delivery to DERM of the application for the NFA with Conditions, Seller shall have no further liability hereunder to Buyer or its successor and assigns for Seller’s Remedial Obligations. Notwithstanding the foregoing, if DERM requires documentation of any work previously performed by Seller, information regarding title or survey or similar matters, or evidence of Seller’s consent to Buyer’s performance of remedial activities, Seller agrees to cooperate with Buyer to provide the information to DERM in a diligent and timely manner (it being understood that Seller shall have no obligation to Buyer or its successors and assigns to complete any further field work, sampling, testing or remediation of any kind with respect to any DERM-Required Work).  To the extent any of this Amendment is inconsistent with Exhibit “M,” the terms of this Amendment shall govern.

12. Legal Description.  The parties acknowledge that a disagreement arose with respect to the legal description of the Land which Seller had agreed to convey to Buyer and which Buyer agreed to purchase from Seller.  Buyer hereby waives any further objection to the accuracy of such legal description and shall accept title to the Property with the legal description attached to this First Amendment as Exhibit “E”.

13. Covenant in lieu of Unity of Title. It is intended that the property described on Exhibit “F” will be divided pursuant to a Covenant in Lieu of Unity of Title.  At Closing, Buyer and Seller shall execute any and all documents required to apply for and secure the Covenant in lieu of Unity of Title, which is attached hereto as Exhibit “G”, including the submission of any documents reasonably required by the City of Miami.

14. Time of the Essence.  Time is of the essence of the Contract and this First   Amendment.

15. Geo-Technical Testing.  Buyer shall have the right to enter upon the Land and Improvements as of the date of this Amendment and until the Closing Date for the purpose of conducting soil borings and test piles (collectively referred to herein as “Geo-Technical Testing”).  Buyer acknowledges that the purpose of the Geo-Technical Testing is limited to determining the location and design of foundations and the length of piles. Prior to entering the land to conduct Geo-Techncical Testing, Buyer shall provide Seller with reasonable notice of Buyer’s intent to conduct Geo-Technical Testing, which notice shall include a brief description of the approximate location of, and time and personnel needed to conduct Geo-Technical Testing.  Buyer’s Geo-Technical Testing shall not unreasonably interfere with Seller’s use of the Property.  To the extent Buyer performs any Geo-Technical Testing prior to Closing, Seller hereby consents to providing Buyer with reasonable access to the Property as necessary to perform the Geo-Technical Testing, and Buyer agrees to indemnify Seller for any injury to persons or damage to property arising out of Buyer’s negligence and/or Buyer's intentional wrongful acts and/or Buyer's intentional wrongful omissions in the performance of such additional Geo-Technical Testing by Buyer (it being understood that such indemnification obligations shall survive any termination of the Amended Contract).  Buyer shall not conduct any environmental sampling of the Property in connection with Buyer’s performance of any Geo-Technical Testing. The results of any Geo-Technical Testing performed by Buyer shall not modify Seller’s Remedial Obligations as set forth in the Existing Contract, Exhibit “M” to the Existing Contract, or Paragraph 11 of this Amendment.  Buyer’s obligation to close shall be as otherwise required by this Amendment.  To the extent any of this Amendment is inconsistent with Paragraph 4.1 of the Existing Contract or Exhibit “M,” the terms of this Amendment shall govern.

IN WITNESS WHEREOF, this First Amendment to Contract is entered into as of the date first appearing above.

                                                     BUYER:

 CITISQUARE GROUP, LLC, a Florida limited liability company

                                                     By: /s/P.A. Martin

                                                     Name: P.A. Martin (Pedro A. Martin)

                                                     Title: President

                                                     SELLER:

 RICHWOOD, INC.,  a Florida corporation

                                                     By: /s/ Karole Morgan-Prager

 Name:  Karole Morgan-Prager

 Title:    Secretary

 THE McCLATCHY COMPANY., a Delaware corporation

 By:  /s/Gary Pruitt

                                                     Name:  Gary Pruitt

                                                     Title:    COB, President & CEO

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Gary B. Pruitt, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of The McClatchy Company;
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(s) 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 (the registrant's fourth fiscal quarter in the case of an annual report) 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 officers 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 (or persons performing the equivalent functions):
	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:  August 10, 2007	/s/ Gary B. Pruitt
	Gary B. Pruitt      Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Patrick J. Talamantes, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of The McClatchy Company;
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(s) 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 (the registrant's fourth fiscal quarter in the case of an annual report) 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 officers 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 (or persons performing the equivalent functions):
	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:  August 10, 2007	/s/ Patrick J. Talamantes
	Patrick J. Talamantes      Chief Financial Officer

EX-32.1

EXHIBIT 32.1

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 McClatchy Company (the "Company") on Form 10-Q for the fiscal period ended July 1, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gary B. Pruitt, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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 results of operations of the Company.

Dated: August 10, 2007	/s/ Gary B. Pruitt
	Gary B. Pruitt      Chief Executive Officer

EX-32.2

EXHIBIT 32.2

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 McClatchy Company (the "Company") on Form 10-Q for the fiscal period ended July 1, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Patrick J. Talamantes, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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 results of operations of the Company.

Dated: August 10, 2007	/s/ Patrick J. Talamantes
	Patrick J. Talamantes      Chief Financial Officer