UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF

THE SECURITIES EXCHANGE ACT OF 1934 (Amendment No.     )

 

Filed by the Registrant  þ

 

Filed by a Party other than the Registrant  o

 

Check the appropriate box:

 

þ  Preliminary Proxy Statement

o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

o  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to §240.14a-12

 

BLAIR CORPORATION

(Name of Registrant as Specified In Its Charter)

 

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

 

Payment of Filing Fee (Check the appropriate box):

o  No fee required.

 

 

 

Common Stock, no par value, of Blair Corporation

 

 

4,084,681 shares of Common Stock (consisting of 3,990,093 shares of Common Stock issued, exclusive of treasury stock and inclusive of 138,501 unvested restricted Common Shares issued pursuant to Stock Plans, as of January 22, 2007, 94,588 shares of Common Stock issuable upon exercise of “in-the-money” stock options)

 

 

$171,528,411.18

 

$18,353.54

 

o  Fee paid previously with preliminary materials.

 

 

 

 

 

 

Preliminary Copy — Subject to Completion

 

February   , 2007

 

Dear Stockholder:

 

A special meeting of stockholders of Blair Corporation, a Delaware corporation, has been scheduled for          , March   , 2007, at 11:00 a.m., Eastern Standard Time, at The Library Theatre, located at 302 Third Avenue West, Warren, Pennsylvania. At the special meeting, we will ask you to consider and vote on a proposal to adopt an Agreement and Plan of Merger, dated January 23, 2007, or the “merger agreement”, pursuant to which Appleseed’s Topco, Inc., a Delaware corporation, has agreed to acquire our company in a cash merger, or the “merger”. Following the merger, Blair will become a wholly owned subsidiary of Appleseed’s. If the merger agreement is adopted by our stockholders and the merger completed, you will no longer have an ownership interest in our company and your shares of Blair common stock will be converted into the right to receive $42.50 in cash, referred to as the merger consideration, without interest and less applicable withholding taxes, for each share of common stock that you own, unless you have properly exercised your appraisal rights with respect to the merger. The merger consideration represents a premium of approximately 15% to the closing price of our common stock on January 22, 2007, the last trading day before the public announcement of the signing of the merger agreement.

 

Our board of directors unanimously adopted resolutions: (i) approving the merger agreement; (ii) determining that the merger agreement and the terms and conditions of the merger are fair to, advisable and in the best interests of our company and our stockholders; and (iii) directing that the merger agreement be submitted for adoption at a special meeting of our stockholders. In reaching this determination, our board of directors considered a variety of factors, which are discussed in the attached proxy statement. Our board of directors unanimously recommends that all of our stockholders vote “FOR” the proposal to adopt the merger agreement.

 

The merger cannot be completed unless a majority of the outstanding shares of our common stock entitled to be cast at the special meeting vote to adopt the merger agreement.

 

The accompanying Notice of Special Meeting of Stockholders and proxy statement explain the merger agreement and the merger and provide specific information concerning the special meeting. Please carefully read these materials and each appendix attached to the proxy statement.

 

Your vote is very important, regardless of the number of shares you own. You may vote either by proxy or in person at the special meeting. To be certain that your shares are voted at the special meeting, please mark, sign, date and return promptly the enclosed proxy card in the postage-paid return envelope provided, or authorize the individuals named on the proxy card to vote your shares by calling the toll-free telephone number or by using the Internet as described in the instructions included with the proxy card, whether or not you plan to attend the special meeting in person. If you do not return your proxy card or authorize a proxy to vote on your behalf by telephone or Internet, or you abstain or do not instruct your broker or other nominee how to vote your shares, it will have the same effect as voting against the proposal to adopt the merger agreement.

 

OUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF OUR COMPANY AND OUR STOCKHOLDERS. ACCORDINGLY, OUR BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE PROPOSAL TO ADOPT THE MERGER AGREEMENT.

 

Please do not send your stock certificates to us at this time.

 

On behalf of our board of directors, thank you in advance for your continued support.

 

Sincerely,

 

Craig Johnson

Chairman of the Board of Directors

 

This proxy statement is dated February   , 2007 and is first being mailed to our stockholders on or about February   , 2007.

BLAIR CORPORATION

220 Hickory Street, Warren, Pennsylvania 16366
(814) 723-3600

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AT 11:00 A.M. ON          , MARCH          , 2007

 

 

NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Blair Corporation, will be held at The Library Theatre, located at 302 Third Avenue West, Warren, Pennsylvania on          , March   , 2007 at 11:00 a.m., Eastern Standard Time, for the following purposes, all of which are more completely set forth in the accompanying proxy statement:

 

(1) to consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of January 23, 2007, or the merger agreement, by and among Appleseed’s Topco, Inc., a Delaware corporation, or Appleseed’s, BLR Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Appleseed’s, or BLR Acquisition, and Blair Corporation, a Delaware corporation. A copy of the merger agreement is attached to this proxy statement as Appendix A. Pursuant to the terms of the merger agreement, BLR Acquisition will merge with and into Blair, with our company being the surviving corporation and becoming a wholly-owned subsidiary of Appleseed’s following the merger, and each share of our common stock, other than those shares of common stock, if any, held by stockholders who properly exercise their appraisal rights under Delaware law, will be converted into the right to receive $42.50 in cash, without interest; and

 

(2) to consider and vote upon a proposal to grant discretionary authority to adjourn the special meeting if necessary or appropriate to permit further solicitation of additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement.

 

Our board of directors unanimously recommends that all of our stockholders vote “FOR” the proposal to adopt the merger agreement.

 

The board of directors has fixed          , 2007 as the record date for the determination of stockholders entitled to notice of and to vote at the special meeting and any adjournment or postponement thereof. Only those stockholders of record as of the close of business on that date will be entitled to notice of and to vote at the special meeting. At the close of business on the record date, there were           shares of our common stock entitled to vote at the special meeting.

 

Our company’s stockholders have the right to dissent from the merger and obtain payment in cash of the appraised fair value of their shares under applicable provisions of Delaware law. In order to perfect and exercise appraisal rights, stockholders must give written demand for appraisal of their shares before the taking of the vote on the merger at the special meeting and must not vote in favor of the proposal to adopt the merger agreement. A copy of the applicable Delaware statutory provisions is included as Appendix C to the accompanying proxy statement, and a summary of these provisions can be found under “The Merger — Appraisal Rights” in the accompanying proxy statement.

 

By Order of the Board of Directors,

 

Herbert G. Hotchkiss

Corporate Secretary

 

Warren, Pennsylvania

 

February   , 2007

YOUR VOTE IS VERY IMPORTANT. THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF OUR COMMON STOCK ENTITLED TO BE CAST AT THE SPECIAL MEETING IS REQUIRED TO ADOPT THE MERGER AGREEMENT. EVEN IF YOU PLAN TO BE PRESENT AT THE SPECIAL MEETING, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE PROVIDED OR AUTHORIZE THE INDIVIDUALS NAMED ON THE PROXY CARD TO VOTE YOUR SHARES BY CALLING THE TOLL-FREE TELEPHONE NUMBER OR BY USING THE INTERNET AS DESCRIBED IN THE INSTRUCTIONS INCLUDED WITH THE PROXY CARD. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM THE RECORD HOLDER IN ORDER TO VOTE IN PERSON AT THE SPECIAL MEETING. FAILURE TO VOTE YOUR SHARES BY MAIL, TELEPHONE, INTERNET OR IN PERSON AT THE SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER.

BLAIR CORPORATION PROXY STATEMENT

 

TABLE OF CONTENTS

 

 

This proxy statement and the documents incorporated herein by reference contain forward-looking statements by us within the meaning of Sections 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are based on our current expectations, assumptions, estimates and projections about our company and our industry. These forward-looking statements include our statements concerning whether and when the merger will close, whether conditions to the merger will be satisfied, and the effect of the merger on our business and operating results. In addition, any of the words “believes,” “expects,” “anticipates,” “estimates,” “plans,” “projects,” “predicts” and similar expressions indicate forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements due to, among other things:

 

 

The statements made in this proxy statement represent our views as of the date of this proxy statement, and it should not be assumed that the statements made in this proxy statement will remain accurate as of any future date. Except to the extent required by applicable law or regulation, we undertake no duty to any person to update the statements made in this proxy statement under any circumstances. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions.

 

For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please see our reports that have been filed with the Securities and Exchange Commission, or SEC, under “Where You Can Find More Information.”

 

SUMMARY

	•	determined that the merger and the terms of the merger agreement are fair to, advisable and in the best interests of our company and our stockholders;
	•	approved the merger agreement, the merger and the other transactions contemplated by the merger agreement; and
	•	recommends that our stockholders vote “FOR” the proposal to adopt the merger agreement.

	•	adoption of the merger agreement by our stockholders;
	•	no law, rule, regulation, executive order or decree, judgment, injunction, ruling or other order having been enacted, issued, promulgated, enforced or entered by a governmental entity that is in effect and has the effect of preventing or prohibiting the consummation of the merger or otherwise imposing material limitations on the ability of BLR Acquisition and Appleseed’s to effectively acquire or hold our business and those of our subsidiaries;
	•	all regulatory approvals or waivers required to consummate the transactions contemplated by the merger agreement by any governmental authority having been obtained and remaining in full force and effect, and all statutory waiting periods in respect thereof having expired;
	•	the performance, subject to various materiality qualifications, by all parties of their respective obligations, agreements and covenants in the merger agreement, and the representations and warranties of Appleseed’s, BLR and Blair in the merger agreement being true and correct, subject to the applicable materiality qualifiers and specific exclusions;
	•	the holders of not more than 15% of our outstanding common stock having demanded appraisal rights with respect to their shares under Delaware law;
	•	other than previously disclosed in our SEC filings prior to January 23, 2007, no effect, event or change having occurred since December 31, 2005, which has had, or would reasonably be expected to have, a material adverse effect on our company; and
	•	the receipt by Appleseed’s of signed letters of resignation from each of the directors of Blair and its subsidiaries, effective at or prior to the effective time of the merger.

	•	by Blair, Appleseed’s or BLR Acquisition, if:

	•	any governmental entity has issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the merger and such order or other action is final and non-appealable;
	•	the closing has not occurred on or before July 23, 2007, or the “Termination Date”; provided that the right to terminate the merger agreement pursuant to this section will not be available to a party whose failure to perform any covenant or obligation under the merger agreement was the cause of or resulted in the failure of the merger to occur on or before the Termination Date;
	•	there exists any state or federal law, order, rule or regulation that makes the consummation of the merger illegal or otherwise prohibited;
	•	our stockholders do not adopt the merger agreement at the special meeting or any postponement or adjournment thereof;
	•	the merger has not been completed on or prior to the Termination Date as a result of a breach by BLR Acquisition or Appleseed’s of any of their respective covenants or agreements in the merger agreement such that the closing condition with respect thereto would not be satisfied, or a breach by BLR Acquisition or Appleseed’s of any of their respective representations and warranties in the merger agreement such that the closing condition with respect thereto would not be satisfied and, in either such case, such breach is not cured within 30 days after receipt by BLR and Appleseed’s of notice of such breach; and
	•	there is a material breach by the non-terminating party of any of its representations, warranties, covenants or agreements in the merger agreement such that the closing conditions would not be satisfied and such breach has not been cured within 30 days following notice by the terminating party or cannot be cured by the Termination Date; provided that there is no cure period for the breach by Blair of certain covenants and guaranties related to the its non-solicitation obligation, and its obligations related to the proxy statement and stockholders’ meeting.
	•	by Blair, prior to the adoption of the merger agreement by our stockholders, if our board of directors approves a superior proposal in accordance with the terms of the merger agreement;
	•	By Appleseed’s or BLR Acquisition, if

	•	our board of directors withdraws or modifies in a manner adverse to Appleseed’s or BLR Acquisition its recommendation that Blair’s stockholders adopt the merger agreement,
	•	our board of directors fails within two (2) business days of Appleseed’s or BLR Acquisition’s written request to reaffirm its recommendation of the merger agreement,
	•	our board of directors approves or recommends to Blair’s stockholders, or takes no position with respect to or fails to recommend against acceptance of any acquisition proposal, or
	•	Blair fails to call a special meeting of Blair stockholders within 35 days of mailing this proxy statement or fails to mail this proxy statement within five days after it is cleared by the SEC.

 

The following questions and answers briefly address some questions you may have regarding the special meeting and the proposed merger. These questions and answers may not address all questions that may be important to you as a stockholder of our company. Please refer to the more detailed information contained elsewhere in this proxy statement, the appendices to this proxy statement and the documents referred to or incorporated by reference in this proxy statement.

 

Q: What matters will be voted on at the special meeting?

 

A: You will be asked to consider and vote on the following proposals:

 

 

Q: What effect will the merger have on our company?

 

A: If the merger is completed, we will be wholly-owned by Appleseed’s and our common stock will no longer be publicly traded.

 

Q: What will I receive in the merger?

 

A: If the merger is completed, you will be entitled to receive $42.50 in cash, referred to as the merger consideration, without interest and less any applicable withholding taxes, for each share of our common stock you own at the effective time of the merger. For example, if you own 100 shares of our common stock, you will be entitled to receive $4250.00 in cash, less any applicable withholding taxes, in exchange for those shares.

 

Q: What vote is needed to adopt the merger agreement and authorize the merger?

 

A: The affirmative vote of a majority of the outstanding shares of our common stock entitled to be cast at the special meeting is required to adopt the merger agreement. Each holder of our common stock is entitled to one vote per share. Proxies returned to us, if properly signed and dated but not marked to indicate your voting preference, will be counted as votes “FOR” the proposal to adopt of the merger agreement.

 

Q: What vote is required from our stockholders to approve the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies?

 

A: The proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies requires the affirmative vote of a majority of the shares of our common stock present in person or by proxy at the special meeting.

 

Q: Who is soliciting my vote?

 

A: This proxy solicitation is being made and paid for by us. In addition, we have retained Georgeson Shareholder Communications to assist in the solicitation. We will pay Georgeson Shareholder Communications approximately           plus out-of-pocket expenses for its assistance. Our directors, officers and employees may also solicit proxies by personal interview, mail, e-mail, telephone, facsimile or by other means of communication. These persons will not be paid additional remuneration for their efforts. We will also request brokers and other fiduciaries to forward proxy solicitation materials to the beneficial owners of shares of Blair common stock that such brokers and fiduciaries hold of record. We will remunerate them for their reasonable expenses.

 

Q: How does Blair’s Board of Directors recommend that I vote?

 

A: Our Board of Directors unanimously recommends that our stockholders vote “FOR” the adoption of the merger agreement and “FOR” the adjournment proposal.

 

Q: Who is entitled to attend the special meeting?

 

A: All of our stockholders are invited to attend the special meeting. Our stockholders of record on February   , 2007 can vote in person at the special meeting.

 

Q: Do I need to attend the special meeting in person in order to vote?

 

A: No. You do not have to attend the special meeting in order to vote your shares of our common stock. Your shares can be voted at the special meeting without attending by mailing your completed, dated and signed proxy card in the enclosed postage-paid return envelope or by authorizing the individuals named on the proxy card to vote your shares by calling the toll-free telephone number or by using the Internet as described in the instructions included with the proxy card.

 

Q: May I vote in person?

 

A: Yes. If your shares are not held in street name through a broker or bank you may attend the special meeting and vote your shares in person. If your shares are held in street name, then you must get a proxy from your broker or bank to attend the special meeting and vote.

 

Q: What do I need to do now?

 

A: We urge you to read this proxy statement carefully, including each appendix, and to consider how the merger affects you. Then, sign, date and mail your proxy card in the enclosed postage-paid return envelope or authorize the individuals named on the proxy card to vote your shares by calling the toll-free telephone number or by using the Internet as described in the instructions included with the proxy card as soon as possible. This will enable your shares to be represented and voted at the special meeting. If you sign and send in your proxy card and do not indicate how you want to vote, your proxy card will be counted as a vote in favor of the proposal to adopt the merger agreement.

 

Q: What happens if I do not return a proxy card by mail, vote by telephone or the Internet or vote in person at the special meeting?

 

A: If you fail to return your proxy card by mail, do not vote by telephone or the Internet or do not vote in person at the special meeting, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting. In addition, the failure to return your proxy card by mail, to cast your vote by telephone or the Internet or vote in person at the special meeting will have the same effect as voting against the proposal to adopt the merger agreement.

 

Q: If my shares are held in street name by my broker or bank, will my broker or bank automatically vote my shares for me?

 

A: No. Your broker, bank or other nominee will not be able to vote shares held by it in “street name” on your behalf without instructions from you. You should instruct your broker, bank or other nominee to vote your shares, following the directions your broker, bank or other nominee provides.

 

Q: What if I fail to instruct my broker or bank?

 

A: Failure to vote, including the failure to give your broker, bank or other nominee instructions, will have the same effect as voting against the proposal to adopt the merger agreement.

 

Q: May I change my vote after I have mailed my signed proxy card or cast my vote by telephone or the Internet?

 

A: Yes. You may change your vote at any time before your proxy is voted at the special meeting. You can do this in one of three ways. First, you can send a written, dated notice to our Secretary stating that you would like to revoke your proxy. Second, you can complete, date, and submit a new proxy card by mail or cast your vote by telephone or the Internet, and any earlier dated proxies will be revoked automatically. Third, you can attend the special meeting and vote in person. Your attendance alone will not revoke your proxy. If you have instructed a broker, bank or other nominee to vote your shares, you must follow directions received from your broker, bank or other nominee to change your vote.

 

Q: What does it mean if I get more than one proxy card?

 

A: If your shares are registered differently and are in more than one account, you will receive more than one card. Please complete and return all of the proxy cards you receive to ensure that all of your shares are voted.

 

Q: Should I send in my stock certificates now?

 

A: No. After the merger is completed, you will receive written instructions for exchanging your shares of our common stock for the merger consideration of $42.50 in cash, without interest and less applicable withholding taxes, for each share of our common stock that you own at the effective time of the merger. DO NOT SEND ANY STOCK CERTIFICATES WITH YOUR PROXY.

 

Q: When do you expect to complete the merger?

 

A: We are working toward completing the merger as quickly as possible and we anticipate that it will be completed in the Spring of 2007, subject to the receipt of stockholder approval and satisfaction of the other closing conditions under the merger agreement.

 

Q: What if the merger is not completed?

 

A: If the merger is not completed, we will continue our current operations and will remain a publicly held company and you will not receive any of the merger consideration.

 

Q: Will the merger be a taxable transaction for me?

 

A: If you are a U.S. taxpayer, for United States federal income tax purposes and under most state and local tax laws, your receipt of the merger consideration will be treated as a taxable sale of our common stock held by you. See “The Merger — Material Federal Income Tax Consequences of the Merger.”

 

Q: What about payment of dividends through closing?

 

A: The merger agreement does not permit us to pay regular quarterly dividends from January 23, 2007 through the date the merger is completed. If the merger is not completed and the merger agreement terminated, it is expected that we will continue with regular quarterly dividends.

 

Q: Am I entitled to appraisal rights?

 

A: Yes. If you are a stockholder who objects to the merger, and if you comply with the required procedures under Delaware law, you will be entitled to appraisal rights under Delaware law. See “The Merger — Appraisal Rights.”

 

Q: Whom should I call with questions?

 

A: If you would like additional copies, without charge, of this proxy statement or if you have questions about the merger, including the procedures for voting your shares, you should contact our proxy solicitor, Georgeson Shareholder Communications, Inc., toll free at (    )     -     .

 

We are furnishing this proxy statement to our stockholders as part of the solicitation of proxies by our board of directors for use at the special meeting, and at any adjournment of the special meeting.

 

We will hold the special meeting on March   , 2007 at 11:00 a.m., Eastern Standard Time, at The Library Theatre, 302 Third Avenue West, Warren, Pennsylvania.

 

At the special meeting, stockholders will be asked to consider and vote upon:

 

 

Pursuant to Delaware law and our bylaws, no matter other than the proposals to adopt the merger agreement and, if deemed necessary, to adjourn the special meeting to permit further solicitation, will be brought before the special meeting.

 

The close of business on          , 2007 has been fixed by our board of directors as the record date for the determination of holders of our common stock entitled to notice of, and to vote at, the special meeting and any adjournment of the special meeting. At the close of business on the record date, there were [          ] shares of our common stock outstanding and entitled to vote held by approximately [          ] holders of record. Each share of our common stock entitles the holder to one vote at the special meeting on all matters properly presented at the special meeting.

 

A quorum, consisting of the holders of a majority of the shares of our common stock entitled to vote as of the record date, must be present in person or by proxy before any action may be taken at the special meeting. Shares of our common stock represented at the special meeting but not voting, including shares of our common stock for which proxies have been received but for which stockholders have abstained, will be treated as present at the special meeting for purpose of determining the presence or absence of a quorum for the transaction of all business at the special meeting but will not be counted as votes cast. Holders of record of our common stock on the record date are entitled to one vote per share on each matter to be considered at the special meeting.

 

The proposal to adopt the merger agreement requires the affirmative vote of a majority of the shares of our common stock outstanding on the record date and entitled to be cast at the special meeting. If a holder of our common stock abstains from voting or does not vote, either in person or by proxy, it will have the effect of a vote against the proposal to adopt the merger agreement. If you hold your shares in “street name” through a broker, bank or other nominee, you must direct your broker, bank or other nominee to vote in accordance with the instructions you have received from your broker, bank or other nominee. Brokers, banks or other nominees who hold shares of our common stock in street name for customers who are the beneficial owners of those shares may not give a proxy to vote those customers’ shares in the absence of specific instructions from those customers. These non-voted shares will have the effect of votes against the proposal to adopt the merger agreement.

 

The proposal to approve adjournments of the special meeting if deemed necessary or appropriate to permit the solicitation of additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement, requires the affirmative vote of a majority of the shares of our common stock represented in person or by proxy at the special meeting, even if less than a quorum. Accordingly, not voting at the special meeting will have no effect on the outcome of this proposal, but abstentions will have the same effect as a vote against this proposal.

 

Our stockholders of record may vote by mail, telephone, Internet or by attending the special meeting and voting in person. If you choose to vote by mail, simply mark the enclosed proxy card, date and sign it, and return it in the postage-paid return envelope provided. Delaware law permits electronic submission of proxies through the Internet or by telephone, instead of submitting proxies by mail on the enclosed proxy card. Thus, our stockholders of record have the option of submitting their proxies electronically through the Internet or by telephone as described in the instructions included with the proxy card.

 

If your shares are held in the name of a bank, broker or other holder of record, you will receive instructions from the holder of record that you must follow in order for your shares to be voted. Also, please note that if the holder of record of your shares is a broker, bank or other nominee and you wish to vote at the special meeting, you must bring a letter from the broker, bank or other nominee confirming that you are the beneficial owner of the shares.

 

The grant of a proxy on the enclosed form of proxy does not preclude a stockholder from voting in person at the special meeting. A stockholder may revoke a proxy at any time prior to its exercise by:

 

 

If you have instructed your bank, broker or other nominee to vote your shares, you must follow directions received from your bank, broker or other nominee to change or revoke your proxy.

 

All shares represented by properly executed proxies received prior to the special meeting (and not revoked) will be voted at the special meeting in the manner specified by the holders thereof. Properly executed proxies that do not contain voting instructions will be voted FOR the proposal to adopt the merger agreement and FOR approval of adjournment of the special meeting if deemed necessary or appropriate to permit the solicitation of additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement. No proxy that is specifically marked AGAINST the proposal to adopt the merger agreement will be voted in favor of the adjournment proposal, unless it is specifically marked FOR the proposal to adjourn the special meeting to a later date.

 

All costs related to the solicitation of proxies, including the printing and mailing of this proxy statement, will be borne by us. We have retained Georgeson Shareholder Communications, Inc. to aid in the solicitation of proxies and to verify records relating to the solicitation. Georgeson Shareholder Communications, Inc. will receive a fee for its services of $      and expense reimbursement. In addition to solicitation by mail, our directors, officers and employees may solicit proxies from stockholders in person or by telephone, telegram, facsimile, or other electronic methods, without additional compensation other than reimbursement for their actual expenses. However, you should be aware that certain members of our board of directors and our officers have interests in the merger that are different from, or in addition to, yours. See “The Merger — Interests of Our Directors and Executive Officers in the Merger” beginning on page 39.

 

Arrangements also will be made with custodians, nominees and fiduciaries to forward solicitation material to the beneficial owners of stock held of record by such persons, and we will reimburse such custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses in connection with these arrangements.

 

Stockholders should not send stock certificates with their proxies. A letter of transmittal with instructions for the surrender of our common stock certificates will be mailed to our stockholders as soon as practicable after completion of the merger.

 

Our board of directors has adopted resolutions: (i) approving the merger agreement; (ii) determining that the merger agreement and the terms and conditions of the merger are fair to, advisable and in the best interests of our company and our stockholders; and (iii) directing that the merger agreement be submitted for adoption at a special meeting of our stockholders. Our board of directors unanimously recommends that all of our stockholders vote “FOR” the proposal to adopt the merger agreement. Our board of directors also unanimously recommends that our stockholders vote “FOR” approval of adjournment of the special meeting if deemed necessary or appropriate to facilitate the solicitation of additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement. See “The Merger — Our Reasons for the Merger” beginning on page 17.

 

If our stockholders have more questions about the merger agreement or the merger or how to submit their proxy, or if they need additional copies of the proxy statement or the enclosed proxy card, they should contact our proxy solicitor, Georgeson Shareholder Communications, Inc. at (          )          -          .

 

The following information describes the material aspects of the merger agreement and the merger. This description does not purport to be complete and is qualified in its entirety by reference to the appendices to this document, including the merger agreement. Our stockholders are urged to carefully read the appendices in their entirety.

 

Parties to the Merger

 

Blair.  We are a national catalog and multi-channel direct marketer of women’s and men’s apparel and home products. We sell a broad range of women’s and men’s apparel and home products through direct mail marketing and through our Web site www.blair.com. Blair employs approximately 1,900 associates (worldwide) and operates facilities and retail outlets in Northwestern Pennsylvania and Wilmington, Delaware. Our principal executive offices are located at 220 Hickory Street, Warren, Pennsylvania 16366 and our telephone number is (814) 723-3600.

 

Appleseed’s.  Appleseed’s is a portfolio company of Golden Gate, a leading private equity firm, and is a leading, multi-channel marketer of apparel and home products focused on serving the needs of the women and men above the age of 50. Appleseed’s provides products to consumers through the direct channels of catalog, internet and retail. Appleseed’s is comprised of the brands Appleseed’s, Draper’s & Damon’s, Haband, Norm Thompson, Sahalie, Solutions and The Tog Shop. Appleseed’s principal executive offices are located at 30 Tozer Road, Beverly, Massachusetts 01915 and its telephone number is (978) 922-2040.

 

BLR Acquisition.  BLR Acquisition is a wholly-owned subsidiary of Appleseed’s organized under the laws of Delaware. It was incorporated solely for the purposes of the merger and is engaged in no other business other than those incidental to its formation and in connection with the transactions contemplated by the merger agreement. BLR Acquisition’s principal executive offices are located at 30 Tozer Road, Beverly, Massachusetts 01915 and its telephone number is (978) 922-2040.

 

Our board of directors has unanimously approved the merger whereby our company will become a wholly-owned subsidiary of Appleseed’s. If the merger agreement is adopted and the merger completed, BLR Acquisition will merge with and into Blair, with Blair as the surviving corporation in the merger. If the merger is completed, unless you have properly exercised your appraisal rights with respect to the merger, you will be entitled to receive the merger consideration of $42.50, without interest and less applicable withholding taxes, in exchange for each share of our common stock that you own at the effective time of the merger. We encourage you to read carefully the merger agreement in its entirety, a copy of which is attached as Appendix A to this proxy statement, because it is the legal document that governs the merger.

 

After the merger is completed, you will have the right to receive the merger consideration but you will no longer have any rights as a stockholder of Blair. You will receive your portion of the merger consideration after exchanging your stock certificates representing our common stock in accordance with the instructions contained in a letter of transmittal to be sent to you shortly after completion of the merger.

 

Our common stock is currently registered under the Exchange Act and is listed on the American Stock Exchange under the symbol “BL.” Following the merger, our common stock will be delisted from the American Stock Exchange and will no longer be publicly traded, and the registration of our common stock under the Exchange Act will be terminated.

 

Our board of directors has periodically discussed and reviewed our business, strategic direction, performance and prospects in the context of developments in the women’s and men’s apparel and home products industry and the competitive landscape in the industry in which we operate. As a result, our board of directors has also at times discussed with senior management various potential strategic alternatives involving possible acquisitions or business combinations that could complement and enhance our competitive strengths and strategic position and increase stockholder value. To assist us in these deliberations, the board and management hired two advisors: Tucker Alexander to help with acquisitions, and Stephens to help explore strategic alternatives. In this regard, our management has from time to time communicated informally with representatives of other similar entities,

including Appleseed’s, regarding industry trends and issues, their respective companies’ strategic direction and the potential benefits and issues arising from a potential business combination or other strategic transaction. No business combinations or other strategic transaction resulted from any of these efforts. As part of this evaluation, we signed letters of intent on two separate occasions to acquire Appleseed’s between the years of 2001 and 2003. In both instances, the proposed transactions never advanced beyond the due diligence stage.

 

In November of 2005, Appleseed’s was acquired by affiliates of Golden Gate. Shortly thereafter, in January of 2006, John Zawacki, our President and Chief Executive Officer at the time, now our Vice Chairman, contacted Neale Attenborough, Chief Executive Officer of Appleseed’s, to see if he had any interest in potentially joining our management team. Mr. Attenborough indicated that he was happy in his current position with Appleseed’s.

 

From January 2006 to April 2006, Mr. Attenborough contacted Mr. Zawacki several times to try to arrange meetings to discuss potential strategic alternatives with us. On April 18, 2006, Mr. Attenborough and Mr. Zawacki met in Jamestown, New York. At this meeting, Mr. Attenborough outlined how he believed that Blair would be a significant strategic fit for the platform of multi-channel apparel entities that Golden Gate was building. Following that meeting, Mr. Attenborough contacted Mr. Zawacki several times to see if we were interested in pursuing a potential strategic transaction. During that period of time, we continued to evaluate other acquisition candidates.

 

In May of 2006, as part of the process of pursuing potential acquisition candidates, Tucker Alexander contacted Stefan Kaluzny, a managing director of Golden Gate, and inquired whether Golden Gate would be interested in selling Appleseed’s or one of their other portfolio companies to us. Mr. Kaluzny stated that Golden Gate was not interested in selling either Appleseed’s or any of its other portfolio companies to us. However, Mr. Kaluzny subsequently made it clear that Golden Gate was interested in acquiring Blair.

 

Over the next few months no discussions between the parties occurred. We continued to evaluate our strategic alternatives but did not consummate any business combinations or other strategic transactions. In August of 2006, Mr. Kaluzny expressed to Tucker Alexander that Golden Gate was interested in negotiating an acquisition of Blair. If Blair was not interested in negotiating a transaction, Mr. Kaluzny informed Tucker Alexander that Golden Gate might consider various alternatives, including a tender offer.

 

During the period from September to November 2006, our board and management continued to evaluate our business strategy and strategic alternatives for the future. However, we did not consummate any business combination or strategic transaction during this time. On November 13, 2006, Craig Johnson, our Chairman of the Board, and Mr. Zawacki met with Mr. Attenborough and Mr. Kaluzny in Pittsburgh, Pennsylvania. During that meeting, Mr. Kaluzny and Mr. Attenborough set forth the strategic direction for Appleseed’s and again stated their interest in adding Blair to the Golden Gate portfolio. No specific offer was made at that time and we communicated to Messrs. Kaluzny and Attenborough that we were not interested in being acquired at that time. Following this meeting until January 2, 2007, there were no discussions between us and Golden Gate or Appleseed’s.

 

On January 2, 2007, Mr. Attenborough contacted Mr. Zawacki to state that he would be faxing Mr. Zawacki and Mr. Johnson a letter offering to acquire Blair. On January 3, 2007, we received a letter from Appleseed’s offering to acquire all of the outstanding shares of our company’s common stock for $37.50 per share in cash. The letter also stated that if we did not respond within two days, Appleseed’s reserved the right to make the offer to acquire Blair public, as well as take such actions as commencing a cash tender offer and proposing its nominees as directors.

 

After consulting our outside legal counsel, Patton Boggs LLP, and our investment advisor, Stephens, on January 5, 2007, Stephens contacted Mr. Attenborough to arrange a meeting on January 9, 2007. On January 8, 2007, our board of directors met with legal counsel and Stephens to review the Appleseed’s offer, which it determined to be inadequate and discussed potential strategic alternatives and defensive measures.

 

On January 9, 2007, Mr. Kaluzny, Mr. Attenborough, Mr. Johnson, Adelmo S. Lopez, our Executive Vice President and Chief Operating Officer at the time (now our President and Chief Executive Officer), and representatives of Stephens met in New York to discuss the Appleseed’s offer. At that meeting, Mr. Kaluzny informed us that Appleseed’s and its affiliates had acquired over 5% of our stock and that they remained very interested in acquiring Blair, including by tender offer if an agreement could not be reached with our board. We informed him that our board of directors believed the offer of $37.50 per share did not represent sufficient consideration.

 

On January 10, 2007, Mr. Kaluzny contacted Stephens and increased the offer to purchase Blair to $39.00 per share in cash. On January 11, 2007, our board of directors met to evaluate this proposal and potential strategic alternatives. At that meeting, the board considered potential defensive measures and authorized Stephens to contact parties that had previously expressed an intention to acquire Blair. These parties responded that they were either not interested in such a transaction or not interested in such a transaction at the price being offered by Appleseed’s. Additionally, our board agreed to meet with Mr. Kaluzny and Mr. Attenborough to discuss Appleseed’s offer.

 

On January 14, 2007, Mr. Kaluzny and Mr. Attenborough met with our board of directors, in Erie, Pennsylvania, regarding their offer. At that meeting, Mr. Kaluzny and Mr. Attenborough again discussed Golden Gate’s portfolio of companies and the plans for Blair following the proposed acquisition. Following the presentation, our board of directors met and went through a detailed analysis with Stephens regarding the $39.00 per share offer. The board of directors specifically rejected the $39.00 per share offer because it did not represent sufficient consideration.

 

On January 15, 2007, Mr. Kaluzny raised the Appleseed’s offer to $41.50 per share in cash and stipulated that the offer must be accepted by January 18, 2007 or Appleseed’s would commence a tender offer. On the same day, our board of directors met and directed Stephens to continue to negotiate with Appleseed’s to obtain a higher price and the right to shop for other potential buyers for Blair following signing of a merger agreement, also referred to as a “Go Shop” provision.

 

On January 16, 2007, Appleseed’s raised its offer to $42.50 per share and agreed to the concept of a Go Shop provision in the merger agreement. Our board of directors held another meeting and authorized management to negotiate a merger agreement, including those terms. During the period of January 17, 2007 through January 22, 2007, the parties negotiated the specific terms of the merger agreement. On January 18, 2007, Golden Gate, Appleseed’s and certain of their affiliates filed a Schedule 13D with the SEC stating that they owned approximately 8.1% of our common stock, they had previously made an offer to acquire our company for $37.50 per share in cash and that they were in negotiations with us. On that same day, we also issued a press release stating that we had received their offer and that we were in discussions with them.

 

During the course of negotiations, the board of directors was kept apprised of important details of the negotiations by our financial advisor and legal counsel. At one point during the course of negotiations, Appleseed’s lowered its offer to $41.50 per share in cash after receiving certain information from us. The board of directors rejected this offer and informed Appleseed’s that it would not recommend a deal to our stockholders at that price. Appleseed’s subsequently raised its offer price to $42.50 per share.

 

On the evening of January 22, 2007, our board of directors met to consider the fully-negotiated merger agreement. At that time, Stephens discussed a range of matters, including the amount and form of the merger consideration, the structure of the transaction, business and financial information regarding the parties, our historical stock price performance, our financial performance in 2006 and our prospects for 2007 and years thereafter, valuation methodologies and analyses and the other matters set forth in “Opinion of Our Financial Advisor.” After this discussion, Stephens rendered to our board of directors its opinion that, as of the date of the meeting and based upon and subject to the considerations described in its opinion, the proposed $42.50 per share cash merger consideration was fair, from a financial point of view, to holders of our common stock. Patton Boggs LLP, our outside legal counsel, then discussed with our board of directors matters relating to the proposed merger and related agreements. Following these presentations, our board meeting continued with discussions and questions among the members of the board, management and our legal and financial advisors. The meeting was then recessed until the following morning.

 

On the morning of January 23, 2007, after further discussion, and taking into consideration the factors described below under “ — Our Reasons for the Merger,” our board determined that the merger presented the best potential opportunity and strategic transaction for our company and our stockholders and was advisable and in the best interests of our company and our stockholders. Our board then unanimously approved and adopted the merger agreement and unanimously resolved to recommend that our stockholders vote to adopt the merger agreement. Following approval by our board of directors, the parties executed the merger agreement and, then, on January 23, 2007, publicly announced the transaction by joint press release.

 

During the period from January 23, 2007 through February   , 2007, under the supervision of our board of directors, representatives of Stephens contacted           potential strategic acquirors and           potential financial acquirors. Of these           parties,           entered into a non-disclosure agreements with Blair. However, as of the date of this proxy statement, no party has submitted a proposal to pursue a transaction with Blair.

 

Our board of directors, at its meetings held on the evening of January 22, 2007 and the morning of January 23, 2007, considered the merger agreement and unanimously determined it to be fair, and in the best interests of our company and our stockholders. In evaluating the merger, our board of directors consulted with management, as well as our legal and financial advisors, and considered a number of factors. Listed below are the material factors that our board of directors considered in its decision:

 

 

The board of directors also took into account a number of potentially adverse factors concerning the merger including, without limitation, the following:

 

 

The foregoing discussion of the factors considered by our board of directors in this section “— Our Reasons for the Merger” is not intended to be exhaustive, but, rather, includes the material factors considered by our board of directors. In reaching its decision to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, our board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. Our board of directors considered all these factors as a whole, and, overall, considered the factors to be favorable to, and supportive of, its determination.

 

After careful consideration, our board of directors unanimously determined that the merger agreement and the merger are in the best interests of our company and our stockholders, and approved the merger agreement. Our board of directors unanimously recommends that you vote “FOR” the proposal to adopt the merger agreement.

 

On October 3, 2006, we hired Stephens, to act as our financial advisor with respect to exploring strategic alternatives and as a business consultant to evaluate operational prospects and to explore financing options available to us. On January 9, 2007, we retained Stephens to act as our financial advisor to review and analyze strategic alternatives related to this transaction. In its role as financial advisor, Stephens was requested to furnish an opinion as to the fairness, from a financial point of view, to our stockholders of the consideration to be offered to those stockholders in the merger. On January 22, 2007, Stephens rendered its oral and written opinion to our board of directors that as of that date, and based upon and subject to certain matters stated in that opinion, from a financial point of view, the consideration to be offered to our stockholders in the merger was fair to such stockholders.

 

The full text of Stephens’ opinion is attached as Appendix B to this proxy statement. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Stephens in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the opinion. We urge our stockholders to read the entire opinion carefully in connection with their consideration of the merger.

 

The Stephens’ opinion was provided for the information and assistance of our board of directors in connection with its consideration of the merger. The Stephens’ opinion does not address any other aspect of the transaction and is not intended to be and does not constitute a recommendation to any stockholder of Blair as to how that stockholder should vote with respect to the merger or any related matter. Stephens was not requested to opine as to, and the Stephens’ opinion does not address, our underlying business decision to proceed with or effect the merger,

nor does the Stephens opinion address the relative merits of the merger with Appleseed’s compared to any other business strategies or alternatives that might be available to us.

 

In arriving at its opinion, Stephens reviewed and analyzed:

 

 

In addition, Stephens had discussions with our management concerning our business, operations, assets, liabilities, financial condition and prospects and undertook such other studies, analyses and investigations as Stephens deemed appropriate.

 

In arriving at its opinion, Stephens assumed and relied upon the accuracy and completeness of the financial and other information used by Stephens without assuming any responsibility for independent verification of that information. Stephens further relied upon the assurances of our management that they were not aware of any facts or circumstances that would make that information inaccurate or misleading. In arriving at its opinion, upon our advice, Stephens assumed that the estimates provided by our management were a reasonable basis to evaluate our future financial performance and that we would perform substantially in accordance with those estimates. In arriving at its opinion, Stephens did not conduct a physical inspection of our properties and facilities and did not make or obtain any evaluations or appraisals of our assets or liabilities. Stephens’ opinion necessarily was based upon market, economic and other conditions as they existed on, and could be evaluated as of, the date of the Stephens opinion.

 

At the January 22, 2007 meeting of our board of directors, Stephens made a presentation of certain financial analyses of the merger. The following is a summary of the material valuation, financial and comparative analyses in the presentation that was delivered to our board of directors by Stephens. Some of the summaries of financial analyses include information presented in tabular format. In order to fully understand the financial analyses performed by Stephens, the tables must be read together with the accompanying text of each summary. The tables alone do not constitute a complete description of the financial analyses, including the methodologies and assumptions underlying the analyses, and if viewed in isolation could create a misleading or incomplete view of the financial analysis performed by Stephens.

 

Implied Transaction Multiples Analysis.  Stephens calculated and compared various implied transaction multiples based on the fully diluted equity consideration to be received by the holders of the outstanding shares of Blair common stock at $42.50 per share, assuming the exercise of all the in-the-money options, less the proceeds from such exercise, which is referred to in this discussion as equity value, and the sum of Blair’s equity value and the net book value of Blair’s net debt (which is the sum of Blair’s total debt less cash and cash equivalents), which is referred to in this discussion as enterprise value. Based on Blair’s financial statement projections prepared by management, Stephens calculated the following multiples for Blair:

 

 

Each of the multiples was calculated for each of the projected fiscal years 2006 and 2007. The following table sets forth the results of this analysis:

 

Enterprise Value as a Multiple of:

Sales

EBITDA

EBIT

FY 2006E

0.3

x

31.3

x

NM

FY 2007E

0.4

x

6.5

x

11.0x

 

Summary of Imputed Share Values.  Stephens assessed the fairness of the per share merger consideration to the holders of shares of Blair common stock other than Appleseed’s and its affiliates by assessing the value of Blair using several methodologies, including an analysis of historical stock prices, a comparable companies analysis using valuation multiples from selected publicly traded companies, a discounted cash flow analysis, a leveraged buyout analysis, a normalized margin analysis, a premiums paid analysis, an historical one year stock price analysis and a comparable acquisitions analysis, each of which is described in more detail in the summaries set forth below. Each of these methodologies was used to generate imputed valuation ranges that were then compared to the per share merger consideration.

 

The following table shows the ranges of imputed valuation per common share of Blair derived under each of these methodologies. The table should be read together with the more detailed summary of each of these valuation analyses as set forth below.

 

		Imputed Valuation
		Per Common Share
Valuation Methodology		Minimum				Maximum
Comparable Companies Analysis		$	15.49			$	75.58
Comparable Transactions Analysis		$	14.37			$	18.83
Discounted Cash Flow Analysis		$	33.69			$	41.93
Premiums Paid Analysis		$	41.38			$	44.69
Leveraged Buyout Analysis		$	28.45			$	35.30
Historical One-Year Stock Price Analysis		$	23.73			$	46.44
Normalized Margin Analysis		$	27.82			$	54.24

 

Comparable Companies Analysis.  Stephens analyzed the public market statistics of certain comparable companies to us and examined various trading statistics and information relating to those companies. As part of this comparable companies analysis, Stephens examined market multiples for each company including:

 

 

The estimated 2006 and 2007 revenue and EBITDA were obtained from various Wall Street research reports. The stock price data used for this analysis was the closing price for the selected companies on January 19, 2007.

 

Stephens selected the companies below because their businesses and operating profiles are reasonably similar to ours. No comparable company identified below is identical to us. A complete analysis involves complex considerations and qualitative judgments concerning differences in financial and operating characteristics of the comparable companies and other factors that could affect the public trading values of those comparable companies. Mathematical analysis (such as determining the mean or the median) is not in itself a meaningful method of using selected company data.

 

In choosing comparable companies to analyze, Stephens selected the following companies:

 

 

 

The following table summarizes the results from the comparable companies’ analysis:

 

						Comparable
		Blair				Companies(1)
Enterprise Value to:
2007 Revenue Estimate			0.3x				1.0x
2006 EBITDA Estimate			26.9x				9.2x
2007 EBITDA Estimate			5.6x				8.0x

 

 

 

Stephens did not rely solely on the quantitative results of the analysis in developing reference ranges or otherwise applying its analysis. Based on its experience with mergers and acquisitions, various judgments concerning relative comparability of each of the selected companies, the relative historical trading level of Blair versus comparable companies and using the selected multiples as a general guide, Stephens selected a range that it believed reflected an appropriate range of multiples applicable to Blair. Stephens then applied the selected range to the appropriate projected revenue or EBITDA estimate as provided by management in order to derive an implied per share reference range for the company shares. As a result of this analysis, Stephens derived a range for the implied value per share of our common stock of $15.49 to $75.58. Stephens noted that the merger consideration of $42.50 per share of our common stock was within the range derived.

 

Comparable Transactions Analysis.  Stephens reviewed the publicly available information for selected catalog retail and retail related mergers or acquisitions announced since January 1, 2005 deemed to be reasonably comparable to the proposed transaction. For the selected merger transactions listed below, Stephens used publicly available financial information to determine the multiple of the enterprise value to latest twelve-month or LTM, EBITDA by dividing the publicly announced transaction value of each selected transaction by the publicly available latest twelve-month EBITDA of the target company prior to the transaction announcement. The following transactions were reviewed by Stephens (in each case, the first named company was the acquirer and the second named company was the acquired company):

 

 

 

Stephens considered these selected merger transactions to be reasonably similar, but not identical, to the merger. The selected transaction may differ significantly from the proposed merger based on, among other things, the structure of the transactions, the financial and other characteristics of the parties to the transactions, and the dates that the transactions were announced or consummated. A complete analysis involves complex considerations and qualitative judgments concerning differences in the selected merger transactions and other factors that could affect the multiples paid in those comparable transactions to which the merger is being compared. Mathematical analysis (such as determining the mean or the median) is not in itself a meaningful method of using selected merger transaction data.

 

The following table sets forth the results of the analysis:

 

		Blair				Median
		Implied by				Comparable
		the Merger(1)				Transactions
Enterprise Value to:
LTM EBITDA			31.3x				9.4x

 

 

 

Stephens did not rely solely on the quantitative results of the selected transaction analysis in developing a reference range or otherwise applying its analysis. Stephens, based on its experience with mergers and acquisitions, various judgments concerning the relative comparability of each of the selected transactions to the proposed merger, and using the selected multiples as a general guide, selected a range that it believed reflected an appropriate range of multiples applicable to Blair. This analysis suggested an implied value range of approximately $14.37 to $18.83 per share of our common stock based on Enterprise Value to LTM EBITDA estimated multiples of comparable transactions. Stephens noted that the merger consideration offered of $42.50 per share was above the derived range for the implied value per share of our common stock.

 

Discounted Cash Flow Analysis.  Stephens performed a discounted cash flow analysis to estimate a range of the present values per share of our common stock using EBITDA that Blair is expected to generate during fiscal years ended December 31, 2007 through December 31, 2012 based on financial projections prepared by Company management through the years ended December 31, 2010 and management guidance through the years ended

December 31, 2012. The valuation range was determined by adding (1) the present value of unlevered free cash flow for the period January 1, 2007 through December 31, 2011, and (2) the present value of the “terminal value” of our common stock. In calculating the terminal value of our common stock, Stephens applied multiples ranging from 5.0x to 7.0x to 2012 forecasted EBITDA. Over the period from January 18, 2002 to January 19, 2007, Blair’s common stock has traded at an average enterprise value to LTM EBITDA of 5.9x. The free cash flow stream and the terminal value were then discounted back to December 31, 2006, using discount rates ranging from 15.0% to 17.0%, which range Stephens viewed as appropriate for a company with our risk characteristics. This analysis suggested an acquisition value range of approximately $33.69 to $41.93 per share of our common stock. Stephens noted that the merger consideration of $42.50 per share was above the derived range for the implied value per share of our common stock.

 

Implied Price per Share Present Value Indications

 

		Terminal Multiple of 2011E EBITDA
Discount Rate		5.0x				5.5x				6.0x				6.5x				7.0x
15.0%		$	35.54			$	37.14			$	38.74			$	40.33			$	41.93
15.5%		$	35.06			$	36.63			$	38.19			$	39.75			$	41.31
16.0%		$	34.60			$	36.12			$	37.65			$	39.18			$	40.71
16.5%		$	34.14			$	35.64			$	37.13			$	38.63			$	40.12
17.0%		$	33.69			$	35.16			$	36.62			$	38.09			$	39.55

 

Premiums Paid Analysis.  Stephens reviewed publicly available information regarding the premiums paid in forty-one transactions announced since June 30, 2006 with transaction values ranging from $100 million to $300 million excluding transactions where the target operated as a real estate investment trust or was an energy-related company.

 

As part of the premiums paid analysis, Stephens examined mean and medium premiums for each transaction including:

 

 

The results of this analysis are set forth below:

 

		Premium to Enterprise Value
		1 Day Prior to				1 Week Prior to				4 Weeks Prior to
		Announcement				Announcement				Announcement
Mean			30.4%				31.4%				33.4%
Median			26.7%				27.7%				30.4%

 

Based on this analysis, Stephens derived a range for the implied price per share of our common stock of $41.38 to $44.69 based on applying a 25% to 35% premium to the average of the share price over the 30 trading days prior to the issuance of this fairness opinion of $33.10. Stephens noted that the merger consideration of $42.50 per share of our common stock was within the derived range for the implied value per share of our common stock.

 

Leveraged Buyout Analysis.  Stephens also performed an analysis of hypothetical leveraged buyouts of Blair and the value that Blair’s stockholders could receive in such a transaction. For this analysis, Stephens assumed Blair would incur $43.3 million of debt in connection with such buyouts, a target internal rate of return of 20% to 30% for an acquiror intending to exit after 5.0 years (which are consistent with historical leveraged buyouts), an exit multiple of 6.0x EBITDA (from January 18, 2002 to January 19, 2007, Blair’s common stock has traded at an average enterprise value to LTM EBITDA of 5.9x), a 10% management equity position and transaction fees and expenses of 2% of the implied transaction value, including financing fees, M&A and legal fees. Stephens performed this analysis using EBITDA that Blair is expected to generate during fiscal years ended December 31, 2007 through December 31, 2011 based on financial projections prepared by Company management through the years ended December 31, 2010 and management guidance through the year ended December 31, 2011. These projections were based on assumptions regarding the future financial performance of Blair.

 

This analysis yielded an implied per share offer valuation range for each Blair ordinary share of:

 

		Implied
		Share Valuation
Highest Estimated Valuation per Share		$	35.30
Lowest Estimated Valuation per Share		$	28.45

 

Stephens noted that the merger consideration of $42.50 per share was above the derived range for the implied value per share of our common stock.

 

Historical One-Year Stock Price Analysis.  Stephens analyzed the historical daily closing prices per share of our common stock for the one-year period ending January 19, 2007. Stephens noted that during this period, the 52-week high and low closing prices per share of our common stock were $46.44 and $23.73, respectively. Stephens further noted that the merger consideration of $42.50 per share of our common stock was towards the upper end of the 52-week range for the closing prices per share of our common stock for the one-year period ending January 19, 2007. In addition, Stephens noted that a price of $42.50 per share was at the upper end of the 10-year trading range for the stock even when noting that profitability in previous periods was higher that in the 52-week period ending January 19, 2007.

 

Normalized Margin Analysis.  In addition to the analyses summarized above, Stephens performed an illustrative analysis of the implied share price as if the 2006 performance was an outlier, and Blair were valued assuming a return to historical EBITDA margins which averaged 5.2% over the period of January 1, 2002 through the projected year ended December 31, 2006 based on management estimates. Stephens evaluated projections as provided by management, looking at a range of transaction multiples of EBITDA and sensitivities to EBITDA margins achieved. For this analysis, Stephens used the revenue projections for the year ended December 31, 2007 prepared by Blair’s management, and a range of EBITDA margins from 4.15% of revenue (the equivalent of achieving 75% of the projected 2007 EBITDA) to 6% of revenue (the average of Blair’s historical EBITDA margins from the years ended December 31, 2002 through December 31, 2005). The analysis also assumed a transaction multiple of enterprise value to EBITDA of 5.0x to 8.0x (from January 18, 2002 to January 19, 2007, Blair’s common stock has traded at an average enterprise value to LTM EBITDA of 5.9x). As presented below, this analysis resulted in a range of share prices from $27.82 to $54.24, and Stephens noted that the merger consideration of $42.50 per share of our common stock was within the derived range for the implied value per share of our common stock, and above both the median implied price which was $39.91 and the mean implied price which was $40.29.

 

		Multiple of EBITDA
EBITDA Margin		5.0x				6.0x				7.0x				8.0x
4.15% — (75% of projected 2007)		$	27.82			$	31.85			$	35.88			$	39.91
5.00%		$	31.93			$	36.78			$	41.63			$	46.48
5.50% — (100% of projected 2007)		$	34.54			$	39.91			$	45.28			$	50.65
6.00% — (average of FY 2002 to FY 2005)		$	36.78			$	42.60			$	48.42			$	54.24

 

Stephens concluded that the $42.50 offer price per share represented a price that was potentially equivalent to the level at which the Blair stock may trade if Blair’s financial performance improved over the next twelve months as planned and margins returned to historical levels for the full fiscal year 2007. Stephens’ believed the proposed $42.50 offer per share, which was within the range presented by this analysis, was a fair offer from a financial point of view, as it eliminates the inherent operating risk in the projections and provides a similar or higher value per share as Blair could achieve through significant operating improvements over the next twelve months.

 

Stephens performed a variety of financial and comparable analyses for purposes of rendering its opinion. The above summary of these analyses does not purport to be a complete description of the analyses performed by Stephens in arriving at its opinion. The preparation of a fairness opinion is a complex process and is not susceptible to partial analysis or summary description. In arriving at its opinion, Stephens considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor considered by Stephens. Furthermore, Stephens believes that the summary provided and the analyses described above must be considered as a whole and that selecting any portion of Stephens’ analyses, without considering all of them, would create an incomplete view of the process underlying Stephens’ analysis and opinion. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above were merely utilized to create

points of reference for analytical purposes and should not be taken to be the view of Stephens with respect to our actual value.

 

In performing its analyses, Stephens made numerous assumptions with respect to industry performance, general business and economic conditions, and other matters, many of which are beyond the control of Stephens or us. Any estimates contained in the analyses of Stephens are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by those estimates. The analyses performed were prepared solely as part of the analysis by Stephens of the fairness to our stockholders of the consideration to be offered to those stockholders in the merger, from a financial point of view, and were prepared in connection with the delivery by Stephens of its opinion to our board of directors.

 

The consideration to be offered to our stockholders in the merger and other terms of the merger were determined through arms-length negotiations between us and Appleseed’s and was unanimously approved by our board of directors. Stephens provided advice to us during those negotiations. However, Stephens did not recommend any specific price per share or other form of consideration to us or that any specific price per share or other form of consideration constituted the only appropriate consideration for the merger. The opinion of Stephens was one of many factors taken into consideration by our board of directors in making its determination to approve the merger. The analysis of Stephens summarized above should not be viewed as determinative of the opinion of our board of directors with respect to our value or of whether our board of directors would have been willing to agree to a different price per share or other forms of consideration.

 

Our board of directors selected Stephens as its financial advisor because of Stephens’ reputation as a recognized investment banking and advisory firm with substantial experience in transactions similar to the merger and because Stephens is familiar with us and our business. As part of its investment banking and financial advisory business, Stephens is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes.

 

Stephens provides a full range of financial advisory and securities services. Stephens has performed various investment banking services for us in the past and has received customary fees for those services. In the ordinary course of its business, Stephens may actively trade in the securities of Blair for its own account or for the accounts of its customers and, accordingly, may at any time hold or short positions in those securities.

 

Pursuant to an engagement letter between Stephens and us entered into in connection with this transaction, we agreed to pay Stephens a fee, the substantial portion of which is payable upon completion of the merger. Under the terms of this engagement letter, we paid Stephens a fee of $250,000 upon delivery of its fairness opinion to us on January 22, 2007, and we have agreed to pay Stephens an additional fee of approximately $1.9 million upon the closing of the merger. We have also agreed to reimburse Stephens for its reasonable out of pocket expenses incurred in connection with the engagement and to indemnify Stephens and its related parties from and against certain liabilities, including liabilities under the federal securities laws. Prior to our engagement of Stephens in connection with the merger, we had previously hired Stephens on October 3, 2006 to act as our financial advisor with respect to exploring strategic alternatives for our company and serving as a business consultant to us to evaluate operational prospects and to explore financing options available to us. For the services provided by Stephens for this initial engagement in October 2006, we paid Stephens $150,000.

 

The merger will become effective upon the filing of a Certificate of Merger with the Secretary of State of the State of Delaware, unless a later time is agreed upon by Appleseed’s, BLR Acquisition and our company and is specified in the Certificate of Merger. The Certificate of Merger will be filed only after the satisfaction or waiver of all conditions to the merger set forth in the merger agreement.

 

Structure.  At the effective time of the merger, BLR Acquisition will merge with and into Blair. Blair will survive the merger and continue to exist after the merger as a wholly-owned subsidiary of Appleseed’s. All of Blair’s and BLR Acquisition’s properties, rights, powers, privileges and franchises, and all of their debts, liabilities, and duties, will become those of the surviving corporation.

 

Merger Consideration.  At the effective time of the merger, each share of Blair common stock issued and outstanding immediately prior to the effective time of the merger will automatically be converted into the right to receive $42.50 in cash, without interest or dividends and less any applicable withholding of taxes, other than shares of Blair common stock:

 

 

All such shares, when so converted, will automatically be cancelled and retired and cease to exist. After the effective time of the merger, each outstanding stock certificate representing shares of Blair common stock converted in the merger will represent only the right to receive the merger consideration.

 

At the effective time of the merger, all stock options granted by us at or prior to January 23, 2007, shall be canceled and become immediately vested and exercisable in full. In consideration of such cancellation, each holder of any such stock option with an exercise price less than the merger consideration will receive from us in settlement of such stock option at the closing of the merger, a cash payment, subject to any required withholding of taxes, equal to the product of (i) the total number of shares of our common stock subject to such stock option at the effective time of the merger and (ii) the excess, if any, of the merger consideration over the exercise price per share of such stock option. Each stock option that has an exercise price equal to or in excess of the merger consideration shall be canceled at the effective time of the merger for no consideration. We have agreed to use our reasonable best efforts to obtain the written acknowledgement of each holder of a then outstanding stock option that the payment for such cancelled stock option will satisfy in full our obligation to such option holder pursuant to their stock option, and that upon payment for such cancelled stock option, such stock option shall, without any action on our part or the holder, be deemed terminated, canceled, void and of no further force and effect as between us and the option holder and neither party shall have any further rights or obligations with respect to such cancelled stock option.

 

In addition, each share of restricted common stock, which was issued pursuant to our stock plans at or prior to January 23, 2007, whether in book-entry or certificated form, will, at the effective time of the merger, become fully vested and converted into, and cancelled in exchange for, the right to receive the merger consideration, plus any “gross-up” for income taxes payable on account of such acceleration of the vesting of such restricted common stock as provided in each such holder’s restricted stock award agreement as in effect as of January 23, 2007. See “Interests of our Directors and Executive Officers in the Merger” beginning on page 39.

 

At or prior to the effective time of the merger, BLR Acquisition shall deposit or cause to be deposited in trust with a bank or trust company designated by BLR Acquisition and reasonably acceptable to us, or the paying agent, an amount of cash sufficient to pay the merger consideration to each holder of shares of our common stock entitled to receive the merger consideration. Promptly after the effective time of the merger, but in no event more than three business days after the merger, the paying agent will mail to each holder of record of shares of our common stock a notice of effectiveness of the merger, a letter of transmittal and instructions. The letter of transmittal and instructions will tell you how to surrender your common stock certificates in exchange for the merger consideration.

 

You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent without a letter of transmittal.

 

Upon surrender of your stock certificate or certificates to the paying agent, together with a letter of transmittal duly completed and executed in accordance with the instructions, the holder of such stock certificate or certificates be entitled to receive the merger consideration and the stock certificate so surrendered will be cancelled. No interest or dividends will be paid on the merger consideration. The merger consideration may be paid to a person other than the person in whose name the corresponding certificate is registered if the certificate is properly endorsed or is otherwise in the proper form for transfer. In addition, the person who surrenders such certificate must either pay any transfer or other applicable taxes or establish to the reasonable satisfaction of the surviving corporation that such taxes have been paid or are not applicable.

 

The paying agent, Appleseed’s and/or the surviving corporation will be entitled to deduct and withhold, and pay to the appropriate taxing authorities, any applicable taxes required to be deducted or withheld from the merger consideration payable to holders of our common stock or stock options under any applicable provision under federal, state, local or foreign tax law or regulation. To the extent amounts are so deducted or withheld, such amounts shall be treated for all purposes under the merger agreement as having been paid to the person to whom such amounts would otherwise have been paid.

 

After the effective time of the merger, there shall be no transfers on the surviving corporation’s stock transfer books of any shares of our common stock that were outstanding immediately prior to the effective time of the merger. If, after the effective time of the merger, certificates are presented to the surviving corporation for transfer, they will be canceled and exchanged for the merger consideration in accordance with the terms of the merger agreement.

 

None of BLR Acquisition, our company nor the paying agent will be liable to a holder of stock certificates or any person for any cash or other consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. Any portion of the merger consideration deposited with the paying agent that remains undistributed to the holders of certificates evidencing shares of our common stock 180 days after the effective time of the merger will be delivered, upon demand, to the surviving corporation. Holders of certificates who have not surrendered their certificates prior to the delivery of such funds to the surviving corporation may thereafter only look to the surviving corporation for the payment of the merger consideration. Any portion of the merger consideration that remains unclaimed as of a date that is immediately prior to such time as such amounts would otherwise escheat to or become property of any governmental entity will, to the extent permitted by applicable law, become the property of the surviving corporation free and clear of any claims or interest of any person previously entitled to the merger consideration.

 

If your certificates have been lost, stolen or destroyed, upon making an affidavit, in the form acceptable to the surviving corporation, of that fact, and if reasonably required by the surviving corporation, posting a bond in such amount as the surviving corporation may direct as indemnity against any claim with respect to the certificates, the paying agent will issue the merger consideration in exchange for your lost, stolen, or destroyed stock certificates.

 

For information with respect to appraisal rights under Delaware law, see “— Appraisal Rights” beginning on page 45.

 

Pursuant to the merger agreement, our company, Appleseed’s, and BLR Acquisition made certain representations and warranties relating to our respective companies, subsidiaries, businesses and matters related to the merger. For detailed information concerning these representations and warranties, reference is made to Articles III and IV of the merger agreement included as Appendix A hereto.

 

The representations and warranties of each party set forth in the merger agreement have been made solely for the benefit of the other party to the merger agreement. The assertions embodied in our representations and warranties have been qualified by information in a confidential disclosure schedule that we provided Appleseed’s and BLR Acquisition in connection with the signing of the merger agreement. While we do not believe that the confidential disclosure schedule contains material information that is required to be disclosed publicly other than information that has already been so disclosed, the disclosure schedule does contain information that modifies, qualifies and creates exceptions to our representations and warranties contained in the merger agreement, including certain nonpublic information. Accordingly, you should not rely on our representations and warranties as characterizations of the actual state of facts, since they are modified in part by the underlying disclosure schedule.

 

In addition, such representations and warranties (i) will not survive consummation of the merger and cannot be the basis for any claims under the merger agreement by the other party after termination of the merger agreement except if fraudulent or willfully false as of the date of the merger agreement and (ii) are subject to the materiality standards contained in the merger agreement which may differ from what may be viewed as material by investors.

 

The merger agreement contains certain covenants of the parties regarding the conduct of their respective businesses pending the consummation of the merger. These covenants, which are contained in Section 5.01 of the merger agreement included as Appendix A hereto, are described below.

 

Under the merger agreement, we agreed that, subject to certain exceptions and limitations, between January 23, 2007 and the earlier to the effective time of the merger or termination of the merger agreement:

 

 

We have also agreed that, during the same time period, subject to certain exceptions, neither we nor any of our subsidiaries will take any of the following actions:

 

 

 

 

The merger agreement also provides that from January 23, 2007 until the earlier of the effective time of the merger or the termination of the merger agreement, unless expressly contemplated or permitted by the merger agreement or as required by law, Appleseed’s shall not, and will cause BLR Acquisition not to:

 

 

With the exception of the Go Shop Period discussed below, beginning on the date we entered into the merger agreement through the earlier of the effective time of the merger or termination of the merger agreement, we agreed not to and to cause our subsidiaries and our affiliates, and each of our and their respective officers, directors, employees, agents, counsel, accountants, investment bankers, financial advisors and representatives not to, directly or indirectly:

 

 

However, nothing in the merger agreement prevents, prohibits or limits us or our board of directors from:

 

 

Further, nothing in the merger agreement prohibits us or in any way limits or restricts us and our representatives, during the period commencing as of January 23, 2007 and ending as of 11:59 p.m. New York time on February 22, 2007 (the “Go Shop Period”) from furnishing information to, or engaging in discussions or negotiations with, any person that we conclude may make an offer to acquire us, which would be deemed to be an acquisition proposal (which did not result from a breach of our obligations described in this section), if prior to providing such information to, or engaging in discussions or negotiations with, such person, we receive from such person an executed confidentiality agreement on terms no less favorable to us than the confidentiality agreement dated January 20, 2007 that we entered into with Appleseed’s. Immediately following the expiration of the Go Shop Period, we agreed to immediately cease discussions or negotiations with any other party (other than Appleseed’s and BLR Acquisition) relating to any acquisition proposal and to use our reasonable best efforts to cause any such parties in possession of confidential information about us that was provided by us or our representatives to return or destroy all such information in the possession of any such party or its representatives. We have actively been soliciting acquisition proposals during the Go Shop Period and have engaged Stephens to solicit acquisition proposals on our behalf. As of the date of this proxy statement, we have not received any proposals to pursue a transaction with Blair.

 

During the period from January 23, 2007 and until the earlier of the effective of the merger or termination of the merger agreement, if our board of directors is entitled to furnish information to, or engage in discussions or negotiations with, any person on the terms described above, our board of directors may, prior to the special meeting, terminate the merger agreement in respect of any acquisition proposal pursuant to the termination provisions described in the “— Termination of the Merger Agreement” section of this proxy statement beginning on page 37, if

such acquisition proposal constitutes a superior proposal, and our board of directors has determined in good faith after consultation with outside legal counsel, that such action is necessary for them to comply with their fiduciary duties to our stockholders under applicable law.

 

Prior to taking any of the actions described above, our board of directors must:

 

 

In addition, we have agreed that we will promptly (but in any event within 24 hours) notify Appleseed’s orally and in writing of the receipt of any acquisition proposal or any inquiry regarding the making of an acquisition proposal including any request for information, the terms and conditions of such request, acquisition proposal or inquiry and the identity of the person making such request, acquisition proposal or inquiry and will keep Appleseed’s fully informed of the status and details of any such request, acquisition proposal or inquiry. These obligations also apply in respect of any person with whom we have contact during the Go Shop Period.

 

The term “acquisition proposal” is defined in the merger agreement as any offer or proposal for, or any indication of interest in:

 

 

The term “superior proposal” is defined in the merger agreement as any bona fide written acquisition proposal by a person that our board of directors has determined in good faith, after consultation with an independent financial advisor of nationally recognized reputation, is more favorable from a financial point of view to our stockholders than the merger and is reasonably capable of being consummated in a timely manner, taking into account all financial, regulatory, legal and other aspects of such proposal, and for which the person making such acquisition proposal has delivered satisfactory written evidence to our board of directors that the consummation of such acquisition proposal is not contingent on the receipt of financing.

 

Under the merger agreement, Appleseed’s has agreed that it will, and will cause the surviving corporation to:

 

 

 

In addition, employees of our company who remain employed by the surviving corporation and its subsidiaries following the completion of the merger whose employment is terminated following the effective time of the merger will be entitled to receive severance payments and benefits in accordance with the severance plans and benefits as in effect from time to time provided by the surviving corporation and its employees to its former employees.

 

During the three year period immediately following the closing of the merger, Appleseed’s has agreed to cause the surviving corporation, and the surviving corporation has agreed, to, at a minimum, contribute to charitable organizations that serve the Warren, Pennsylvania area/community on a basis consistent with the past practices of our company and our subsidiaries.

 

The merger agreement provides that, after the merger, the surviving corporation will undertake certain indemnification obligations with respect to individuals who are now, or have been at any time prior to the execution of the merger agreement or who become such prior to the effective time of the merger, a director or officer of our company or any of its subsidiaries, or an employee or agent of our company. Additionally, the merger agreement provides that the surviving corporation will provide, for a period of six years after the merger becomes effective, directors’ and officers’ liability insurance covering certain persons. See “— Interests of Our Directors and Executive Officers in the Merger — Indemnification and Insurance” on page 43 for a more detailed discussion of these obligations.

 

Pursuant to the merger agreement, we are required to call a special meeting of our stockholders to consider and vote upon approval and adoption of the merger agreement. Also, our board of directors is required to recommend that our stockholders adopt the merger agreement, subject to the circumstances described under “— No Solicitation and Go Shop Period” beginning on page 31.

 

Subject to certain exceptions, prior to the effective time of the merger, Appleseed’s, BLR Acquisition and our company have agreed to use all reasonable efforts to take, or cause to be taken, all such actions as may be necessary or appropriate or advisable under applicable laws, so as to permit consummation of the transactions as promptly as practicable on the terms and subject to the conditions set forth in the merger agreement and to cooperate fully to that end.

 

The merger agreement contains additional covenants of each of Appleseed’s, BLR Acquisition, and our company, including covenants relating to:

 

 

 

 

 

Completion of the merger is subject to the satisfaction of certain conditions set forth in the merger agreement, or the waiver of such conditions by the party entitled to do so, at or before the effective time of the merger. Each of the parties’ obligations to consummate the merger is subject to the following mutual conditions:

 

 

 

In addition to the mutual conditions set forth above, the obligations of BLR Acquisition and Appleseed’s to consummate the merger is subject to the following conditions, which may be waived in writing by Appleseed’s:

 

 

 

In addition to the mutual conditions set forth above, our obligation to consummate the merger is subject to the following conditions, which may be waived in writing by us:

 

 

 

 

Under the terms of the merger agreement, “identified company representations” means (i) any of our representations or warranties qualified by a company material adverse effect, (ii) our representations or warranties regarding the performance of our obligations under the merger agreement, and (iii) our representations and warranties relating to our capitalization, authority to enter into the merger agreement and consummate the transactions contemplated by the merger agreement, absence of undisclosed change-of-control payments, absence of undisclosed brokers fees, amendments to any rights plan and our activities between January 1, 2007 and the date of the merger agreement, other than unintentional inaccuracies in the representations and warranties referred to in this clause (iii) that would result in an increase in the aggregate merger consideration payable by BLR Acquisition and Appleseed’s in an amount not to exceed $350,000.

 

Further, “company material adverse effect” means any fact, event, circumstance or effect that (i) is material and adverse to our business, financial condition or results of operations other than any “excluded matters,” as defined in the next sentence or (ii) prevents or materially delays our ability to perform in all material respects our obligations under the merger agreement or to consummate the transactions contemplated by the merger agreement in accordance with the terms of the merger agreement. “Excluded Matters” means any one or more of the following (i) changes in laws, rules or regulations of general applicability or interpretations thereof by governmental authorities, (ii) changes in United States generally accepted accounting principles, (iii) general changes in economic conditions or general changes in the industry in which we operate generally which do not have a disproportionate effect on us and our subsidiaries taken as a whole, (iv) a change in the market price or trading volume of the common stock, in and of itself, provided that a change in the market price or trading volume of our common stock may be used, as applicable, as evidence that some other effect, circumstance, event, fact, transaction or occurrence has had, or is reasonably likely to have, a company material adverse effect, (v) expenses incurred in connection with the transactions contemplated by the merger agreement which are permitted by the merger agreement, (vi) the payment of any amounts due and payable, or the provision of any benefits to, any officer or employee of our company or our subsidiaries under employment, change-in-control or severance agreements with respect to any such contractual agreement or arrangement as in effect as of the date of the merger agreement or any payments made to holders of stock options disclosed under the merger agreement, (vii) changes in national or international political or social conditions including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon or within the United States, or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, or (viii) with respect to us, as a result of any action or omission taken with the prior written consent of BLR Acquisition and Appleseed’s or as otherwise expressly permitted by the merger agreement.

 

Under the terms of the merger agreement, a “purchaser material adverse effect” means any effect, circumstance, event or fact that prevents or materially delays the ability of Appleseed’s and BLR Acquisition to perform in all material respects their obligations under the merger agreement or to consummate the transactions contemplated by the merger agreement in accordance with the terms of the merger agreement.

 

Blair, Appleseed’s, and BLR Acquisition have each agreed to use all reasonable efforts to complete the transactions contemplated by the merger agreement. The merger agreement requires that all regulatory approvals or waivers required to consummate the transactions, including under the HSR Act, shall have been obtained and shall remain in full force and effect and all relevant statutory waiting periods shall have expired.

 

Under the HSR Act and the rules promulgated thereunder, the merger cannot be completed until we notify and furnish information to the Federal Trade Commission, or the FTC, and the Antitrust Division of the U.S. Department of Justice, or the Antitrust Division, and specified waiting period requirements are satisfied. We and Appleseed’s filed notification and report forms under the HSR Act with the FTC and the Antitrust Division on February   , 2007 and requested early termination of the waiting period.

 

The merger agreement may be terminated and the merger may be abandoned at any time prior to the effective time of the merger, whether before or after stockholder approval has been obtained, as follows:

 

 

 

 

 

 

 

 

In some cases, termination of the merger agreement may require us to pay a termination fee to Appleseed’s and/or reimburse Appleseed’s for certain reasonable actual expenses, or require Appleseed’s to pay a termination fee to us, as described below under “— Termination Fees.”

 

In the event the merger agreement is terminated as described above, neither we nor Appleseed’s or BLR Acquisition will have any liability thereunder, except as set forth under ‘‘— Termination Fees” below or in respect of certain specified covenants that survive termination. However, termination of the merger agreement will not relieve either us or Appleseed’s or BLR Acquisition of any liability for fraud or for any knowing or willful breach of any of its representations, warranties or covenants contained in the merger agreement.

 

We have agreed to pay Appleseed’s a termination fee of approximately $6.0 million (unless the termination occurs during the Go Shop Period, in which case the fee will be approximately $3.4 million) and reimburse reasonable actual expenses of Appleseed’s concurrently with the termination of the merger agreement if:

 

 

 

Appleseed’s has agreed to pay us a termination fee of approximately $6.0 million concurrently with termination of the merger agreement if:

 

 

 

In addition, we have agreed to reimburse Appleseed’s and BLR Acquisition for certain expenses if:

 

 

The merger agreement may be amended by Appleseed’s BLR Acquisition and our company at any time before or after it is adopted by our stockholders; provided, however, that after any such approval, there shall not be made any amendment that by law requires the further approval by such stockholders without such further approval.

 

The merger agreement also provides that, at any time prior to the effective time of the merger, Appleseed’s, BLR Acquisition or our company may, by written agreement:

 

 

General.  In considering the recommendation of the board of directors with respect to the merger, you should be aware that some of Blair’s executive officers have interests in the merger that may be different from, or in addition to, the interests of our stockholders generally. These interests, to the extent material, are described below. Our board of directors was aware of these interests and considered them, among other matters, in unanimously approving the merger agreement and the merger. See “ — Our Reasons for the Merger” beginning on page 17.

 

Change in Control Agreements.  We have entered into Change in Control Agreements, or “CIC agreements”, with certain of our current executive officers, or “covered executive officers”, which provide for certain benefits to be paid upon a termination of service following a change in control of Blair. In addition under the terms of the CIC agreements, upon the occurrence of a change in control of Blair, covered executive officers will be entitled to certain benefits including immediate vesting of all restricted stock and other lump sum payments, regardless of whether the executive’s employment is terminated. The merger will constitute a change in control of Blair under each CIC agreement.

 

Cash Severance Payment.  Pursuant to each CIC agreement, upon occurrence of a change in control, followed by termination of a covered executive officer’s employment within three years following the change in control (except if such termination is because of death, disability, retirement or termination for cause), we will pay such covered executive officer, or in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be, a cash lump sum equal to (i) three times (two times in the case of Messrs. Blair, Hotchkiss, Parnell, Rowe, Scalise, Vicini and Ms. Dziendziel and Ms. English) his or her base salary at the rate of such covered executive officer’s base salary per annum in effect immediately prior to the change in control or on the date of his or her termination, whichever is higher, plus (ii) the greater of (x) the average annual incentive bonus payment earned by such covered executive officer under our Annual Incentive Plan in respect of our three most recent complete fiscal years preceding the date of the termination of such covered executive officer’s employment or (y) the target incentive bonus award under our Annual Incentive Plan for the year in which the change in control occurs or the year in which their termination occurs, whichever is higher.

 

In addition, each covered executive officer has the right to elect to voluntarily terminate his or her employment within three years following a change in control and receive the cash payment described in the preceding paragraph in the event that such covered executive officer suffers any of the following during such period: (A) any material demotion, (B) any material loss of title, office, or significant authority or responsibility, (C) any material reduction

in annual compensation or benefits, (D) relocation of such covered executive officer’s principal office by more than 50 miles from its location immediately prior to the change in control, or (E) failure by us to obtain satisfactory agreement from any successor to assume the obligations and liabilities of their CIC agreement. The CIC agreements for Messrs. Elliot, Pitorak, Zawacki and Lopez and Ms. Garrett also provide that they may voluntarily terminate their employment for any reason during a 30-day period commencing on the first anniversary of the date of a change in control or control and receive the cash payments described in the preceding paragraph.

 

Long Term Incentive Plan.  Pursuant to each CIC agreement, upon the occurrence of a change in control, we will pay each covered executive officer a cash lump sum equal to three times (two times in the case of Messrs. Blair, Hotchkiss, Parnell, Rowe, Scalise, Vicini and Ms. Dziendziel and Ms. English) the current target award opportunities of such covered executive officer under the Long Term Incentive Plan. The awards under the Long Term Incentive Plan are based on Blair’s performance over a three-year period, and each executive may have more than one outstanding award opportunity under the Long Term Incentive Plan (for instance, an award opportunity for the 2005-2007 period as well as an award for the 2006-2008 period might be outstanding), and the covered executive officer would be entitled to receive three times (two times in the case of Messrs. Blair, Hotchkiss, Parnell, Rowe, Scalise, Vicini and Ms. Dziendziel and Ms. English) the amount of all such outstanding target award opportunities. These amounts become payable immediately upon the occurrence of a change of control, regardless of whether the covered executive officer will remain employed by Blair following the change of control.

 

Profit Sharing Plan.  Pursuant to each CIC agreement, in the event a covered executive officer is terminated or voluntarily terminates his employment in the circumstances which would result in the covered executive officer being paid the cash severance payment described above, we will pay to each covered executive officer a cash amount equal to the contribution we would have made for such covered executive officer under our defined contribution retirement plans (currently, Blair’s Savings Plan and Profit Sharing and 401(k) Plan). The amount we are required to contribute is equal to the amount that we would have contributed or credited to such plans (including both profit-sharing contributions and Company matching contributions in respect of covered executive’s contributions to the plan) had the covered executive officer continued to be employed by us for an additional three years (two times in the case of Messrs. Blair, Hotchkiss, Parnell, Rowe, Scalise, Vicini and Ms. Dziendziel and Ms. English) at an annual compensation equal to the sum of (x) the covered executive officer’s base salary immediately prior to the change in control or at the time of the termination of the covered executive officer’s employment, whichever is higher and (y) the greater of (A) the average annual incentive bonus payment earned by the covered executive officer under our Annual Incentive Plan (or any successor plan) in respect of our three most recent complete fiscal years preceding the date of the termination of the covered executive officer’s employment or the date of the change in control, whichever is higher, or (B) the target incentive bonus award under our Annual Incentive Plan (or any successor plan) for the year in which the change in control occurs or the year in which the termination of the covered executive officer’s employment occurs, whichever is higher. For purposes of this calculation, it is assumed that the covered executive officer made the maximum permissible contributions to such plans during such period. Such contributions will be deemed to have been made immediately prior to the termination of the covered executive officer’s employment. Our contribution shall equal the average contribution based on our performance over the most recently ended three-year period. All vesting restrictions on our contributions shall lapse immediately upon a change in control.

 

Welfare Benefits.  In the event a covered executive officer is terminated or voluntarily terminates his employment in the circumstances which would result in the covered executive officer being paid the cash severance payment described above, we will continue life and medical insurance coverage, including any dental, vision, long-term disability or other insurance-related program, substantially equivalent to the coverage maintained for covered executive officers and his eligible dependents prior termination, except to the extent such coverage may be changed in its application to all of our employees on a nondiscriminatory basis. Such coverage and payments shall cease upon the expiration of the number of months in the covered officer’s severance period following their termination.

 

Outplacement Services.  In the event a covered executive officer is terminated or voluntarily terminates his employment in the circumstances which would result in the covered executive officer being paid the cash severance payment described above, we will for the term of the covered executive officer’s severance period, not to exceed 10% of the covered executive officer’s base salary at the rate per annum in effect immediately prior to the change in control or on the date of the termination of the covered executive officer’s employment, whichever is higher,

reimburse covered executive officers for outplacement services, the scope and provider of which shall be selected by the covered executive officer in his sole discretion.

 

The table below estimates the amount each of our covered executive officers will be entitled to under the terms of each CIC agreement in the event such covered executive officer is terminated or such covered executive officer voluntarily terminates his employment in the circumstances which would result in the covered executive officer being paid the cash severance payment described above. These estimates are based on compensation and benefits levels in effect on January 31, 2007 and assumes a separation date of          .

 

 

Golden Parachutes.  The CIC agreements for Messrs. Lopez, Elliott, Pitorak and Hotchkiss and Ms. Garrett provide that in the event that any payment or benefit, or any combination of payment or benefits, payable to the covered executive officer under the CIC agreement constitutes an “excess parachute payment” under Section 280G of the Internal Revenue Code of 1986, or any successor thereto, at the time such determination becomes final, we will pay an amount (the “gross-up payment”) which would equal, after deducting all state and federal income and excise taxes incurred by the individual with respect to receipt of the gross-up payment, the excise tax, if any, imposed pursuant to Section 4999 of the Code.

 

The CIC agreements for the remaining covered executive officers (Messrs. Rowe, Scalise, Vicini, Parnell, Blair, Ms. Dziendziel and Ms. English provide that in the event that any payment or benefit, or any combination of payment or benefits, payable to the covered executive officer under the CIC agreement constitutes an “excess parachute payment” under Section 280G of the Internal Revenue Code of 1986, or any successor thereto, and in order to avoid such a result, such payment or benefit, or any combination of payment or benefits will be reduced if necessary to the largest amount that will result in no portion of the amount payable or right accruing under such agreements being subject to an excise tax under Section 4999 of the Code.

 

The following table sets forth the total cash value (on a present value basis based on the payments and benefits payable as described above and the value of restricted shares as described below) that each covered executive officer will receive if such covered executive officer is terminated in connection with the merger, including the amount, if any, of any required 280G gross up payments or 280G reduction amounts, if any, as applicable pursuant to such covered executive officer’s CIC agreement.

 

 

Restricted Shares.  Pursuant to the Omnibus Stock Plan, certain outstanding restricted shares issued to covered executive officers vest in full upon a change in control. Holders of those outstanding restricted shares are entitled to receive a cash lump sum payment equal to the federal, state and local income taxes and federal employment taxes associated with the recognition of income associated with the accelerated vesting of such shares. See “— Treatment of Stock Options and Restricted Stock.” Other restricted shares issued to certain covered executive officers (Messrs. Zawacki, Rowe, Parnell, Vicini, Blair, Scalise and Ms. English) under the Omnibus Stock Plan trigger (i) immediate repayment of the loans (for the discounted purchase price paid by such individuals) made by us to such individuals; and (ii) the issuance of such shares, upon a change in control.

 

The following table summarizes the outstanding restricted shares held by our covered executive officers as of February 5, 2007 and the amount of the tax gross up payment that each of them will receive in connection with the vesting of certain of those restricted shares upon a change of control:

 

 

Vacation/Accrued Leave.  Pursuant to our standard employment policies and procedures, upon termination (including upon a change of control), employees including covered executive officers will be paid for any accrued vacation balance remaining and for any personal time balance remaining.

 

Indemnification and Insurance.  The merger agreement provides that, after the merger, the surviving corporation will indemnify, defend and hold harmless the individuals who are now, or have been at any time

prior to the execution of the merger agreement, a director, officer, employee or agent of Blair or any of its subsidiaries, against costs, expenses, damages and liabilities incurred in connection with any claim, action, suit, proceeding or investigation arising out of his or her service as a present or former director, officer, fiduciary or employee of Blair or any of its subsidiaries or his or her serving at the request of Blair or its subsidiaries as a director, officer, employee, fiduciary or agent of another corporation, partnership, joint venture, trust or other enterprise, and arising out of actual or alleged events, actions or omissions occurring or alleged to have occurred at or prior to the effective time of the merger. This indemnification obligation of the surviving corporation shall be to the fullest extent permitted and provided in Blair’s certificate of incorporation and bylaws as in effect on January 23, 2007, and as permitted under Delaware law.

 

The merger agreement also provides that, prior to the effective time of the merger, we will obtain directors’ and officers’ “tail” insurance policies with a claims period of six (6) years from the effective time of the merger in an amount and scope no less favorable than our existing policy covering claims arising from facts or events that occurred on or prior to the effective time at a cost that is reasonable and customary for tail insurance policies with our existing insurer or an insurer with a comparable insurer financial strength rating as our existing insurer. If we shall not have obtained this tail policy, the surviving corporation will provide the directors and officers who are insured under our directors’ and officers’ insurance policy, for a period of not less than six (6) years after the effective time of the merger, with an insurance policy covering events occurring at or prior to the effective time of the merger that is not less favorable taken as a whole than our existing policy (or, if substantially equivalent insurance coverage is unavailable, the best available coverage). However, the surviving corporation is not required to pay an annual premium for this insurance in excess of 250% of the annual premium that we currently pay, and if the annual premium of such coverage exceeds this amount, the surviving corporation is required to use its commercially reasonable efforts to obtain a policy with the greatest coverage available for a cost not exceeding such amount.

 

Appleseed’s also agreed to continue in effect for at least six years after the effective time of the merger all rights to indemnification, advancement of expenses and director exculpation existing in favor of any director, executive officer, employee or agent of Blair or any of its subsidiaries contained in Blair’s certificate of incorporation and bylaws as of the effective time of the merger with respect to matters occurring at or prior to the effective time of the merger.

 

On January 24, 2007, Mr. Richard P. Pogozelski, a purported stockholder of our company, filed a complaint styled Pogozelski v. Blair Corporation, (Civil Action No. 2695-N) in the Court of Chancery of the State of Delaware in New Castle County against us, certain members of our board of directors and Appleseed’s. The complaint alleged, among other things, that our directors have not acted reasonably and breached their fiduciary duties by failing to maximize stockholder value with regard to the proposed acquisition by Appleseed’s. Among other things, the complaint sought class action status, a court order enjoining us and our directors from proceeding with or consummating the merger, compensatory damages, costs and expenses and the payment of attorneys’ and experts’ fees. We believe the complaint is without merit and intend to defend this lawsuit vigorously.

 

General.  The following discussion summarizes the material United States federal income tax consequences of the merger that are generally applicable to U.S. holders of our common stock upon an exchange of their shares of our common stock for cash in the merger. This summary is based upon current provisions of the Code, existing treasury regulations and current administrative rulings and court decisions, all of which are subject to change. Any change, which may or may not be retroactive, could materially alter the tax consequences expressed in this proxy statement. This discussion assumes that you hold our common stock as a capital asset for investment.

 

This section does not discuss all of the United States federal income tax considerations that may be relevant to a particular stockholder in light of his or her individual circumstances or to stockholders subject to special treatment under the federal income tax laws, including, without limitation:

 

 

 

This summary does not address the tax consequences of the merger under state, local and foreign laws or under United States federal tax law other than income tax law. In addition, the following discussion generally does not address the tax consequences of transactions effectuated before, after, or at the same time as the merger, whether or not they are in connection with the merger, including, without limitation, the exercise or cancellation of options or similar rights to purchase stock.

 

As used in this proxy statement, a “U.S. holder” means a beneficial owner of our common stock who is, for United States federal income tax purposes:

 

 

Consequences of the merger to our stockholders.  The receipt of cash by a U.S. holder in exchange for our common stock in the merger will be a taxable transaction for United States federal income tax purposes. In general, with respect to each share of our common stock owned, a U.S. holder will recognize capital gain or loss as a result of the stockholder’s receipt of the merger consideration equal to the difference between the merger consideration per share of our common stock exchanged in the merger and the U.S. holder’s adjusted tax basis in that share. Such gain or loss will be long-term capital gain or loss if the U.S. holder held such share for more than 12 months as of the effective time of the merger. Certain limitations apply to the deductibility of capital losses by U.S. holders.

 

Backup withholding.  A U.S. holder may be subject to federal income tax backup withholding at the rate of 28% (for 2007) with respect to a payment of cash in the merger unless the U.S. holder:

 

 

To prevent backup withholding and possible penalties, you should complete and sign the substitute Form W-9 included in the letter of transmittal, which will be sent to you if the merger is completed. Any amount withheld under these rules will be credited against the U.S. holder’s United States federal income tax liability, provided the required information is furnished to the Internal Revenue Service.

 

We strongly urge you to consult your own tax advisor as to the specific tax consequences to you of the merger, including the applicability and effect of United States federal, state, local and foreign income and other tax laws, in view of your particular circumstances.

 

We and Appleseed’s are each responsible for all costs and expenses incurred in connection with the transactions contemplated by the merger agreement, including all fees and expenses of outside counsel, investment bankers, banks, other financial institutions, accountants, financial printers, experts and consultants.

 

Under Delaware law, you have the right to demand appraisal in connection with the merger and to receive, in lieu of the merger consideration, payment in cash for the fair value of your common stock of Blair as determined by the Delaware Court of Chancery. Blair stockholders electing to exercise appraisal rights must comply with the provisions of Section 262 of Delaware General Corporations Law in order to perfect their rights. Blair will require strict compliance with the statutory procedures.

 

The following is intended as a brief summary of the material provisions of the Delaware statutory procedures required to be followed by a stockholder in order to demand and perfect appraisal rights. This summary, however, is not a complete statement of all applicable requirements and is qualified in its entirety by reference to Section 262 of Delaware General Corporations Law, the full text of which appears in Appendix C to this proxy statement.

 

Section 262 requires that stockholders be notified that appraisal rights will be available not fewer than 20 days before the special meeting to vote on the adoption of the merger agreement. A copy of Section 262 must be included with such notice. This proxy statement constitutes Blair’s notice to its stockholders of the availability of appraisal rights in connection with the merger in compliance with the requirements of Section 262. If you wish to consider exercising your appraisal rights, you should carefully review the text of Section 262 contained in Appendix C since failure to timely and properly comply with the requirements of Section 262 will result in the loss of your appraisal rights under Delaware law.

 

If you elect to demand appraisal of your shares, you must satisfy each of the following conditions:

 

 

If you fail to comply with any of these conditions and the merger is completed, you will be entitled to receive the cash payment for your shares of Blair common stock as provided for in the merger agreement if you are the holder of record at the effective time of the merger, but you will have no appraisal rights with respect to your shares of Blair common stock. A proxy card which is signed and does not contain voting instructions will, unless revoked, be voted “FOR” the adoption of the merger agreement and will constitute a waiver of your right of appraisal and will nullify any previous written demand for appraisal.

 

All demands for appraisal should be addressed to the Secretary of Blair at 220 Hickory Street, Warren, Pennsylvania 16366, and should be executed by, or on behalf of, the record holder of the shares in respect of which appraisal is being demanded. The demand must reasonably inform Blair of the identity of the stockholder and the intention of the stockholder to demand appraisal of his, her or its shares.

 

To be effective, a demand for appraisal by a holder of Blair common stock must be made by, or on behalf of, such record stockholder. The demand should set forth, fully and correctly, the record stockholder’s name as it appears on his or her stock certificate(s). The demand must state that the person intends thereby to demand appraisal of the holder’s shares in connection with the merger. Beneficial owners who do not also hold the shares of record

may not directly make appraisal demands to Blair. The beneficial holder must, in such cases, have the owner submit the required demand in respect of those shares. If shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of a demand for appraisal should be made in that capacity; and if the shares are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or for all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, he or she is acting as agent for the record owner. A record owner, such as a broker, who holds shares as a nominee for others, may exercise his or her right of appraisal with respect to the shares held for one or more beneficial owners, while not exercising this right for other beneficial owners. In that case, the written demand should state the number of shares as to which appraisal is sought. Where no number of shares is expressly mentioned, the demand will be presumed to cover all shares held in the name of the record owner.

 

If you hold your shares of Blair common stock in a brokerage account or in other nominee form and you wish to exercise appraisal rights, you should consult with your broker or the other nominee to determine the appropriate procedures for the making of a demand for appraisal by the nominee.

 

Within 10 days after the effective time of the merger, the surviving corporation must give written notice that the merger has become effective to each Blair stockholder who has properly filed a written demand for appraisal and who did not vote in favor of the merger agreement. At any time within 60 days after the effective time, any stockholder who has demanded an appraisal has the right to withdraw the demand and to accept the cash payment specified by the merger agreement for such stockholder’s shares of Blair common stock. Within 120 days after the effective time, either the surviving corporation or any stockholder who has complied with the requirements of Section 262 may file a petition in the Delaware Court of Chancery, with a copy served on the surviving corporation in the case of a petition filed by a stockholder, demanding a determination of the fair value of the shares held by all stockholders entitled to appraisal. The surviving corporation has no obligation and has no present intention to file such a petition in the event there are dissenting stockholders, and stockholders seeking to exercise appraisal rights should not assume that the surviving corporation will file such a petition or initiate any negotiations with respect to the fair value of such shares. Accordingly, Blair stockholders who desire to have their shares appraised should initiate all necessary action to perfect their appraisal rights in respect of shares of Blair common stock within the time prescribed in Section 262. The failure of a stockholder to file such a petition within the period specified could nullify the stockholder’s previously written demand for appraisal.

 

If a petition for appraisal is duly filed by a stockholder and a copy of the petition is delivered to the surviving corporation, the surviving corporation will then be obligated, within 20 days after receiving service of a copy of the petition, to provide the Register in Chancery with a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal of their shares and with whom agreements as to the value of their shares have not been reached. Within 120 days after the effective time of the merger, any stockholder who has theretofore complied with the applicable provisions of Section 262 will be entitled, upon written request, to receive from the surviving corporation a statement setting forth the aggregate number of shares of common stock not voting in favor of the merger and with respect to which demands for appraisal were received by Blair and the number of holders of such shares. Such statement must be mailed within 10 days after the written request therefor has been received by the surviving corporation.

 

After notice to dissenting stockholders, the Chancery Court will conduct a hearing upon the petition, and determine those stockholders who have complied with Section 262 and who have become entitled to the appraisal rights provided thereby. The Chancery Court may require the stockholders who have demanded payment for their shares to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with that direction, the Chancery Court may dismiss the proceedings as to that stockholder.

 

After determination of the stockholders entitled to appraisal of their shares of Blair common stock, the Chancery Court will appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. When the value is determined, the Chancery Court will direct the payment

of such value, with interest thereon, if the Chancery Court so determines, to the stockholders entitled to receive the same, upon surrender by such holders of the certificates representing those shares.

 

In determining fair value and, if applicable, a fair rate of interest, the Chancery Court is required to take into account all relevant factors. In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods that are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “fair price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.” In determining fair value for appraisal purposes under Section 262 of Delaware General Corporations Law, the Chancery Court might, or might not, employ some or all of the valuation analyses utilized by Blair’s financial advisors as described in summary fashion under “— Opinion of Our Financial Advisor.” Although Blair believes that the merger consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Chancery Court, and you should be aware that the fair value of your shares as determined under Section 262 could be more, the same, or less than the value that you are entitled to receive under the terms of the merger agreement. Moreover, the surviving corporation does not anticipate offering more than the value that you are entitled to receive under the terms of the merger agreement to any stockholder exercising appraisal rights and reserves the right to assert, in any appraisal proceeding, that, for purposes of Section 262, the “fair value” of a share of Blair common stock is less than the merger consideration.

 

Costs of the appraisal proceeding may be imposed upon the surviving corporation and the stockholders participating in the appraisal proceeding by the Chancery Court as the Chancery Court deems equitable in the circumstances. Upon the application of a stockholder, the Chancery Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, to be charged pro rata against the value of all shares entitled to appraisal. Any stockholder who had demanded appraisal rights will not, after the effective time, be entitled to vote shares subject to that demand for any purpose or to receive payments of dividends or any other distribution with respect to those shares, other than with respect to payment as of a record date prior to the effective time; however, if no petition for appraisal is filed within 120 days after the effective time of the merger, or if the stockholder delivers a written withdrawal of such stockholder’s demand for appraisal and an acceptance of the terms of the merger within 60 days after the effective time of the merger or thereafter with the written approval of the surviving corporation, then the right of that stockholder to appraisal will cease and that stockholder will be entitled to receive the cash payment for shares of his, her or its Blair common stock pursuant to the merger agreement. Any withdrawal of a demand for appraisal made more than 60 days after the effective time of the merger may only be made with the written approval of the surviving corporation. Once a petition for appraisal has been filed, the appraisal proceeding may not be dismissed as to any stockholder without the approval of the Chancery Court and such approval may be conditioned upon such terms as the Chancery Court deems just.

 

Failure to comply with all of the procedures set forth in Section 262 will result in the loss of a stockholder’s statutory appraisal rights. In view of the complexity of Section 262, Blair’s stockholders who may wish to dissent from the merger and pursue appraisal rights should consider consulting their legal advisors.

 

If the merger is completed, our common stock will cease trading on the American Stock Exchange and will be deregistered under the Exchange Act.

 

On May 25, 2005 we entered into standstill agreements with two separate groups of stockholders, Loeb Partners Corporation and each of its affiliates, or Loeb, and Santa Monica Opportunity Fund, L.P. and each of its affiliates and principals, or Santa Monica. Each of the standstill agreements have a five year term.

 

Pursuant to these standstill agreements, each of Loeb and Santa Monica agreed that, while the standstill agreements are in effect, it will vote any and all shares of its common stock in favor of the position advocated by a majority of our board of directors at any meeting of stockholders. This requires each of Loeb and Santa Monica to vote all of its shares FOR the proposal to adopt the merger agreement.

 

Additionally, each of Loeb and Santa Monica has agreed that, while its standstill agreement is in effect, neither it nor any of its affiliates or associates will:

 

 

Our common stock is currently reported on the American Stock Exchange composite tape under the symbol “BL.” As of           , 2007, there were             shares of our common stock outstanding, which were held by approximately            holders of record. The number of holders of record do not reflect the number of individuals or institutional investors holding stock in nominee name through brokerage firms and others.

 

The following table shows, for the periods indicated, the range of high and low sale prices for our common stock as quoted on the American Stock Exchange composite tape. The following table also sets forth the dividends declared per share of our common stock for the periods indicated.

 

										Dividends
		Market Price								Declared
Calendar Period		High				Low				Per Share
2007
Quarter ended March 31, 2007 (through February 5, 2007)		$	42.40			$	32.76					(1)
2006
Quarter ended December 31		$	33.02			$	32.59					(1)
Quarter ended September 30		$	25.80			$	25.49			$	0.30
Quarter ended June 30		$	30.49			$	29.50			$	0.30
Quarter ended March 31		$	41.64			$	41.40			$	0.30
2005
Quarter ended December 31		$	38.89			$	32.80			$	0.15
Quarter ended September 30		$	39.80			$	29.86			$	0.15
Quarter ended June 30		$	45.16			$	36.89			$	0.15
Quarter ended March 31		$	41.58			$	35.29			$	0.30

 

 

 

On January 22, 2007, the last full trading day prior to the public announcement of the merger, the closing price per share of our common stock was $36.95. On           , 2007, the last practicable trading day prior to the date of this proxy statement, the closing price per share of our common stock was $          .

 

The following table sets forth certain information, as of February 5, 2007, with respect to the beneficial ownership of common stock owned by (i) each person or entity, including any “group” as that term is used in Section 13(d)(3) of the Exchange Act, who or which was known to us to be the beneficial owner of more than 5% of the issued and outstanding common stock, (ii) our directors, (iii) each of our executive officers, and (iv) all directors and executive officers of our company as a group.

 

		Amount of shares
		beneficially				Percentage of
Name of beneficial owner		owned(1)				Class(2)
Security Ownership of More than 5% Stockholders:
Jewelcor Companies(3)			196,800				5.1	%
Golden Gate Capital Management II, L.L.C.(4)			312,521				8.1	%
Directors:
Harriet Edelman			4,425				*
Cynthia A. Fields			2,925				*
John O. Hanna			22,600				*
Jerel G. Hollens			975				*
Craig N. Johnson			7,750				*
Murray K. McComas			52,325				1.36	%
Ronald L. Ramseyer			4,175				*
Michael A. Schuler			3,100				*
Shelly J. Seifert			850
John E. Zawacki(5)			126,035				3.27	%
Executive Officers Who are Not Directors:
Adelmo S. Lopez			-0-				*
Lawrence J. Pitorak			-0-				*
David Elliott			9,120				*
Randall A. Scalise			16,602				*
Lawrence R. Vicini			9,868				*
All directors and executive officers as a group (22 persons)			304,229				7.90	%

 

 

 

General.  If, at our special meeting on March   , 2007, the number of shares of our common stock, present in person or by proxy, is insufficient to constitute a quorum or the number of shares of our common stock voting in favor of approval of the merger is insufficient to adopt the merger agreement under Delaware law, our management intends to move to adjourn the special meeting in order to enable our board of directors to solicit additional proxies. In that event, we will ask our stockholders to vote only upon the adjournment proposal and not on the proposal relating to the adoption of the merger.

 

In this adjournment proposal, we are asking stockholders to grant discretionary authority to the holder of any proxy solicited by our board of directors so that the holder can vote in favor of the proposal to adjourn the special meeting to solicit additional proxies. If our stockholders approve the adjournment proposal, we could adjourn the special meeting, and any adjourned session of the special meeting, and use the additional time to solicit additional proxies, including the solicitation of proxies from stockholders that have previously voted. Among other things, approval of the adjournment proposal could mean that, even if we had received proxies representing a sufficient number of votes against adoption of the merger to defeat the merger proposal, we could adjourn the special meeting without a vote on the merger proposal and seek to convince the holders of those shares to change their votes to votes in favor of the approval of the merger.

 

At any such adjourned meeting at which the requisite amount of voting stock shall be represented, any business may be transacted that might have been transacted at the meeting as originally noticed. No notice of the adjourned meeting is required to be given to stockholders, other than an announcement at the special meeting of the place, date and time to which the meeting is adjourned.

 

Vote Required.  Pursuant to our bylaws, the adjournment proposal requires the affirmative vote of the holders of a majority of the shares of our common stock present in person or by proxy at the special meeting. Those stockholders entitled to vote, present in person or by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the required majority in number of the aggregate number of voting stock shall be represented. Abstentions will have the same effect as a vote against the adjournment proposal. Under rules of the American Stock Exchange, the proposal to adjourn the special meeting is considered an “non discretionary” item upon which brokerage firms may not vote in their discretion on behalf of their clients if such clients have not furnished voting instructions. Broker “non-votes” will have the same affect as a vote against the adjournment proposal.

 

No proxy that is specifically marked “AGAINST” approval of the merger agreement will be voted in favor of the adjournment proposal, unless it is specifically marked “FOR” granting the discretionary authority to adjourn the special meeting.

 

Recommendation of our Board of Directors.  The board of directors believes that if the number of shares of our common stock present in person or by proxy at the special meeting and voting in favor of approval of the merger is insufficient to adopt the merger agreement, it is in the best interests of our stockholders to enable the board to continue to seek to obtain a sufficient number of additional votes in favor of approval of the merger. Therefore, our board of directors unanimously recommends that you vote “FOR” the proposal to grant discretionary authority to adjourn the special meeting for the purpose of soliciting additional proxies.

 

We will not hold an annual meeting of stockholders in 2007 if the merger is completed because we will no longer be a publicly held company. However, if the merger agreement is terminated for any reason, we expect to hold our regularly scheduled annual meeting of stockholders in May of 2007. If we hold such annual meeting, any proposal a stockholder would have wanted included in our proxy materials relating to the next annual meeting of stockholders of our company should have been received by the Corporate Secretary of Blair Corporation, 220 Hickory Street, Warren, Pennsylvania 16366, no later than November 20, 2006. No such proposals were received.

 

If we hold our 2007 annual meeting, stockholder proposals which are not submitted for inclusion in our proxy materials pursuant to Rule 14a-8 under the Exchange Act must be received by the Corporate Secretary of Blair

Corporation, 220 Hickory Street, Warren, Pennsylvania, 16366, no later than 10 days after we publicly announce the date of an annual meeting, if held. The proxy to be solicited on behalf of Blair for the 2007 Annual Meeting of Stockholders may confer discretionary authority to vote on any such proposal not considered to have been timely received that nonetheless properly comes before the 2007 Annual Meeting of Stockholders.

 

As of the date of this proxy statement, our board of directors knows of no matters that will be presented for consideration at the special meeting other than as described in this proxy statement. However, if any other matter is properly presented at the special meeting, the shares represented by proxies in the form of the enclosed proxy card will be voted in the discretion of the named proxy holders.

 

We file annual, quarterly and current reports, proxy statements and other information with the SEC under the Exchange Act. You may read and copy any reports, proxy statements or other information filed by us at the SEC’s public reference room in Washington, D.C., which is located at the following address: Public Reference Room, 100 F Street, N.E., Washington, D.C. 20549.

 

You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC at the address above, or make your request via email to publicinfo@sec.gov or fax at 202-777-1027. Please call the SEC at 1-202-551-8090 for further information on the operation of the SEC’s public reference room. Our SEC filings are also available to the public from document retrieval services and at the SEC’s Internet website (http://www.sec.gov).

 

You should also be able to inspect reports, proxy statements and other information about us at the offices of the American Stock Exchange, 86 Trinity Place, New York, New York 10006.

 

Our stockholders should not send in their certificates for our common stock until they receive the transmittal materials from the exchange agent after completion of the merger. Our stockholders of record who have further questions about their share certificates or the exchange of our common stock for cash following the completion of the merger should call our proxy solicitation firm, Georgeson Shareholder Communications, Inc., at (          )           -          .

 

You should rely only on the information contained in this proxy statement. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement. This proxy statement is dated February   , 2007. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date. Neither the mailing of this proxy statement to stockholders nor the issuance of cash in the merger creates any implication to the contrary.

APPENDIX A

 

AGREEMENT AND PLAN OF MERGER

dated as of January 23, 2007

by and among

BLAIR CORPORATION,

BLR ACQUISITION CORP.

and

APPLESEED’S TOPCO, INC.

 

 

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