As filed with the Securities and Exchange Commission on October 18, 2007.

File No. 333-146132

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

 

Amendment No. 1
to

Form S-4

 

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

 

M&T Bank Corporation

(Exact Name of Registrant as Specified in Its Charter)

 

One M&T Plaza

Buffalo, New York 14203

(716) 842-5445

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Mark W. Yonkman

Senior Vice President and General Counsel

M&T Bank Corporation

One M&T Plaza

Buffalo, New York 14203

(716) 842-5445

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to:

Approximate Date of Commencement of Proposed Sale to the Public:  As soon as practicable after this Registration Statement becomes effective.

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:  o

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Securities Act”), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  o

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  o

CALCULATION OF REGISTRATION FEE

 

 

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

October 18, 2007

 

Dear Partners Trust Stockholders:

 

You are cordially invited to attend a special meeting of the stockholders of Partners Trust Financial Group, Inc. (“Partners Trust”) which will be held at the Renaissance Syracuse Hotel, 701 East Genesee Street, Syracuse, New York 13210, on November 21, 2007, at 9:00 a.m. local time.

 

At the meeting, you will be asked to adopt the Agreement and Plan of Merger dated as of July 18, 2007 that Partners Trust has entered into with M&T Bank Corporation (“M&T”) and MTB One, Inc., a wholly owned direct subsidiary of M&T (“Merger Sub”), and to approve the related merger and the other transactions contemplated thereby. In the merger, Merger Sub will merge with and into Partners Trust.

 

If the merger is completed, you will receive, at your election (but subject to proration and adjustment as provided in the merger agreement), for each share of Partners Trust common stock you hold immediately prior to the completion date of the merger, cash in the amount of $12.50 or a number of shares of M&T common stock equal to $12.50 divided by the average closing price of M&T common stock for the five trading days immediately prior to completion of the merger. You must make this election by the election deadline, which is set for 5 p.m. on the date of closing, as set forth in the form of election that will be mailed to you. Whether you receive cash and/or M&T common stock as merger consideration, the actual value of the merger consideration you will receive will be $12.50 per share of Partners Trust common stock.

 

After careful consideration, Partners Trust’s board of directors unanimously recommends that you vote “FOR” the proposal to adopt the merger agreement and to approve the merger and the transactions contemplated thereby.

 

To complete the merger, holders of a majority of the outstanding shares of Partners Trust common stock must approve the merger agreement, the merger and the transactions contemplated thereby. Your vote is very important. Whether or not you expect to attend the special meeting, please vote as soon as possible to ensure that your shares are represented at the meeting. Registered and many broker-managed stockholders can vote their shares by using a toll-free number or the Internet. Instructions for using these convenient services are provided on the proxy card. You may also vote your shares by marking your votes on the proxy card, signing and dating it and mailing it with the envelope provided. If you sign and return your proxy card without specifying your choice, it will be understood that you wish to have your shares voted in favor of the merger agreement, the merger and the transactions contemplated thereby.

 

This document provides you with detailed information about the merger. In addition to being a proxy statement of Partners Trust, this document is also the prospectus of M&T for M&T common stock that will be issued in connection with the merger. We encourage you to read the entire document carefully. Please pay particular attention to “Risk Factors” beginning on page 13 for a discussion of the risks related to the merger and owning M&T common stock after the merger.

 

I look forward to seeing you on November 21, 2007 in Syracuse, New York.

 

Sincerely,

 

John A. Zawadzki

President and CEO

 

Please read this document carefully because it contains important information about the merger. Read carefully the risk factors relating to the merger beginning on page 13.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the securities to be issued in the merger or determined if this document is accurate or adequate. It is illegal to tell you otherwise.

 

The securities to be issued in the merger are not savings or deposit accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

 

Proxy statement/prospectus dated October 18, 2007, and first mailed to Partners Trust stockholders on or about October 22, 2007.

 

GENERAL INFORMATION

 

This proxy statement/prospectus incorporates by reference important business and financial information about M&T Bank Corporation (“M&T”) and Partners Trust Financial Group, Inc. (“Partners Trust”) from other documents that are not included in or delivered with this proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain those documents incorporated by reference in this proxy statement/prospectus by accessing the Securities and Exchange Commission’s (the “SEC”) website maintained at http://www.sec.gov or by requesting copies in writing or by telephone from the appropriate company:

 

 

You will not be charged for any of these documents that you request. If you would like to request documents from either company, please do so by November 14, 2007 in order to receive them before Partners Trust’s special stockholder meeting.

 

See “Where You Can Find More Information” on page 62.

 

PARTNERS TRUST FINANCIAL GROUP, INC.

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON NOVEMBER 21, 2007

 

Dear Stockholder:

 

You are cordially invited to attend a special meeting of the stockholders of Partners Trust Financial Group, Inc., a Delaware corporation (“Partners Trust”), on November 21, 2007 at 9:00 a.m. local time, at the Renaissance Syracuse Hotel, 701 East Genesee Street, Syracuse, New York 13210, for the purpose of considering and voting upon the following matters:

 

 

We have fixed the close of business on September 24, 2007, as the record date for determining those stockholders entitled to notice of and to vote at the special meeting and any adjournments or postponements of the special meeting. Only Partners Trust stockholders of record at the close of business on that date are entitled to notice of the special meeting and any adjournments or postponements of the special meeting, and only Partners Trust common stockholders of record at the close of business on that date are entitled to vote at the special meeting and any adjournments or postponements of the special meeting. In order for the proposal to adopt the merger agreement to be approved, the holders of a majority of the outstanding shares of Partners Trust common stock entitled to vote must vote in favor of approval of the proposal. Abstentions and broker non-votes will have the same effect as votes against approval of the merger agreement. If you wish to attend the special meeting and vote in person and your shares are held in the name of a broker, trust, bank or other nominee, you must bring with you a proxy or letter from the broker, trustee, bank or nominee to confirm your beneficial ownership of the shares.

 

We encourage you to read the attached proxy statement/prospectus carefully. If you have any questions or need assistance voting your shares, please call our proxy solicitor, Morrow & Co., Inc., toll-free at 1-800-607-0088.

 

Sincerely,

 

John A. Zawadzki

President and CEO

 

233 Genesee Street

Utica, New York 13501

October 18, 2007

 

Whether or not you plan to attend the special meeting in person, please complete, date, sign and return the enclosed proxy card in the enclosed envelope. The enclosed envelope requires no postage if mailed in the United States. If you attend the special meeting, you may vote in person if you wish, even if you have previously returned your proxy card.

 

Partners Trust’s board of directors unanimously recommends that you vote “FOR” adoption of the merger agreement.

 

TABLE OF CONTENTS

 

		Cash Election		Stock Election
				Market Value of Stock		Number of M&T
M&T Hypothetical 5 day		Cash Consideration per		Consideration per		Shares to be Received
Average Closing Prices		Partners Trust Share		Partners Trust Share(1)		per Partners Trust Share(2)
$97.00		$12.50		$12.50		0.1289
$98.00		$12.50		$12.50		0.1276
$99.00		$12.50		$12.50		0.1263
$100.00		$12.50		$12.50		0.1250
$101.00		$12.50		$12.50		0.1238
$102.00		$12.50		$12.50		0.1225
$103.00		$12.50		$12.50		0.1214
$104.00		$12.50		$12.50		0.1202
$105.00		$12.50		$12.50		0.1190
$106.00		$12.50		$12.50		0.1179
$107.00		$12.50		$12.50		0.1168
$108.00		$12.50		$12.50		0.1157
$109.00		$12.50		$12.50		0.1147
$110.00		$12.50		$12.50		0.1136
$111.00		$12.50		$12.50		0.1126
$112.00		$12.50		$12.50		0.1116
$113.00		$12.50		$12.50		0.1106
$114.00		$12.50		$12.50		0.1096
$115.00		$12.50		$12.50		0.1087
$116.00		$12.50		$12.50		0.1078
$117.00		$12.50		$12.50		0.1068
$118.00		$12.50		$12.50		0.1059
$119.00		$12.50		$12.50		0.1050
$120.00		$12.50		$12.50		0.1042
$121.00		$12.50		$12.50		0.1033
$122.00		$12.50		$12.50		0.1025
$123.00		$12.50		$12.50		0.1016
$124.00		$12.50		$12.50		0.1008
$125.00		$12.50		$12.50		0.1000

(1)		Based on the closing price of M&T common stock on the completion date of the merger being equivalent to the hypothetical five day average closing prices of M&T common stock.

(2)		Based on the hypothetical five day average closing prices of M&T common stock.

	•	If you receive solely shares of M&T common stock and cash in lieu of a fractional share of M&T common stock in exchange for your Partners Trust common stock, then you generally will not recognize any gain or loss, except with respect to the cash received in lieu of a fractional share of M&T common stock.
	•	If you receive solely cash, then you generally will recognize gain or loss equal to the difference between the amount of cash you receive and your cost basis in your Partners Trust common stock. Generally, any gain recognized upon the exchange will be capital gain, and any such capital gain will be long-term capital gain if you have established a holding period of more than one year for your shares of Partners Trust common stock.
	•	If you receive a combination of M&T common stock and cash, other than cash in lieu of a fractional share of M&T common stock, in exchange for your Partners Trust common stock, then you may recognize gain, but you will not recognize loss, upon the exchange of your shares of Partners Trust common stock for shares of M&T common stock and cash. If the sum of the fair market value of the M&T common stock and the amount of cash you receive in exchange for your shares of Partners Trust common stock exceeds the adjusted basis of your shares of Partners Trust common stock, you will recognize taxable gain equal to the lesser of the amount of such excess or the amount of cash you receive in the exchange. Generally, any gain recognized upon the exchange will be capital gain, and any such capital gain will be long-term capital gain if you have established a holding period of more than one year for your shares of Partners Trust common stock. Depending on certain facts specific to you, any gain could instead be characterized as ordinary dividend income.

	•	Partners Trust has three stock option plans pursuant to which outstanding options to purchase shares of Partners Trust common stock are held by its directors, officers and other key employees. Pursuant to the terms of the merger agreement and the applicable option plans and agreements, each outstanding option to purchase Partners Trust common stock will, if granted pursuant to the Partners Trust Plan, become fully vested and exercisable 15 days prior to, and contingent upon, the consummation of the merger, and, if granted pursuant to either of the BSB Plans, become fully vested and exercisable immediately prior to, and contingent upon, the consummation of the merger. Each option to purchase Partners Trust common stock that is not exercised prior to the consummation of the merger will be cancelled in exchange for the right to receive an amount in cash equal to the product of (x) the total number of shares of Partners Trust common stock subject to the stock option, times (y) the excess, if any, of $12.50 over the exercise price per share under such option, less applicable taxes to be deducted and withheld with respect to such payment. As of October 16, 2007, the directors and executive officers as a group held in-the-money options to purchase 1,962,915 shares of Partners Trust common stock.

	•	In accordance with the terms of the merger agreement and existing Partners Trust restricted stock awards and the applicable plans, any restrictions or forfeiture provisions with respect to Partners Trust restricted stock will terminate or lapse and the restricted stock will vest in full immediately prior to the effective time of the merger and will be treated in the merger in the same manner as other shares of Partners Trust common stock. As of October 16, 2007, Partners Trust’s directors and executive officers held an aggregate of 346,896 shares of unvested restricted stock, which will vest in full immediately prior to the effective time of the merger.

	•	Under the merger agreement, M&T has agreed to indemnify the directors and officers of Partners Trust against liabilities arising out of actions or omissions occurring at or before the completion of the merger.
	•	The merger agreement also provides that, subject to certain limitations, M&T will maintain directors’ and officers’ liability insurance for a period of six years after the merger is completed that provides at least the same coverage and amounts, and contains terms and conditions no less advantageous, as that coverage currently provided by Partners Trust.
	•	In conjunction with the merger agreement, M&T Bank entered into agreements with two Partners Trust executive officers: John A. Zawadzki and Steven A. Covert. Under these agreements, each executive’s employment with Partners Trust will terminate at the effective time of the merger and each executive will receive a severance payment on the six-month anniversary of the effective time of the merger and a transaction bonus within ten days after the effective time of the merger. The employment agreements of Messrs. Zawadzki and Covert otherwise remain in effect.
	•	Pursuant to the terms of their employment agreements with Partners Trust, if Messrs. Zawadzki and Covert would be subject to excise tax under sections 280G and 4999 of the Code, Partners Trust will make an additional payment equal to such excise tax plus the additional taxes (including excise tax) that result from the gross-up payment.
	•	Under the terms of Partners Trust’s employment agreements with Messrs. Callahan and O’Toole and Ms. Estrella, if the executive is terminated or terminates his or her employment for good reason, in either case up to six months prior to or within two years following the completion of the merger, the executive will receive a lump sum cash payment equal to two times the average annual compensation paid to the executive by Partners Trust during the five full calendar years, or shorter period of employment, that immediately precede the year in which the merger closes.
	•	In connection with the termination of Mr. Zawadzki’s employment as of the effective time of the merger pursuant to his agreement with M&T, Mr. Zawadzki will receive his full benefits under the Partners Trust Executive Supplemental Retirement Income Agreement. The difference between the present value of the benefits payable upon the termination of employment in connection with the completion of the merger (assuming the merger is completed on November 30, 2007) and the present value of Mr. Zawadzki’s accumulated benefits under the SERP prior to his termination is $1,172,489.

	•	the approval of the merger agreement by Partners Trust stockholders;
	•	the receipt of the required approvals of federal and state regulatory authorities;
	•	the listing on the NYSE of the shares of M&T common stock to be issued in the merger;
	•	the absence of any government action or other legal restraint or prohibition that would prohibit the merger or make it illegal;
	•	the receipt of legal opinions that, for United States federal income tax purposes, the merger will be treated as a reorganization and that both Partners Trust and M&T will be a party to that reorganization. These opinions will be based on customary assumptions and on factual representations made by M&T and Partners Trust and will be subject to various limitations;
	•	the effectiveness of the registration statement filed with the SEC in connection with this document and there being no stop order in respect thereof; and
	•	the representations and warranties of each party to the merger agreement being true and correct in all material respects, and each party to the merger agreement having performed in all material respects all its obligations under the merger agreement.

	•	if there is a final denial of a required regulatory approval;
	•	if the merger is not completed on or before May 18, 2008;
	•	if the requisite vote of Partners Trust common stockholders to approve the merger agreement is not obtained; or
	•	if there is a continuing breach of the merger agreement by the other party, after 60 days’ written notice to the breaching party, as long as that breach would allow the non-breaching party not to complete the merger and such breach has not been cured within 30 days.

	•	if Partners Trust’s board of directors fails to recommend approval of the merger agreement, the merger and the transactions contemplated thereby to its stockholders, or withdraws or materially and adversely modifies its recommendation;
	•	if Partners Trust’s board recommends an acquisition proposal other than the merger, or if Partners Trust’s board negotiates or authorizes negotiations with a third party regarding an acquisition proposal other than the merger and those negotiations continue for at least 15 business days; or
	•	if Partners Trust has breached its covenant not to solicit or encourage inquiries or proposals with respect to any acquisition proposal, in circumstances not permitted under the merger agreement.

	•	Partners Trust enters into an agreement to engage in a competing acquisition proposal with any person other than M&T or any of M&T’s subsidiaries;
	•	Partners Trust authorizes, recommends or proposes (or publicly announces its intention to authorize, recommend or propose) an agreement to engage in a competing acquisition proposal with any such person or its board recommends that Partners Trust stockholders approve or accept such competing acquisition proposal; or
	•	any person, other than M&T or its subsidiaries, acquires beneficial ownership or the right to acquire beneficial ownership of 25% or more of the outstanding shares of Partners Trust common stock.

										Equivalent
										Price per
		Closing Partners				Closing				Partners
		Trust Price				M&T Price				Trust Share
July 18, 2007		$	10.01			$	110.50			$	12.36
October 17, 2007		$	12.36			$	100.00			$	12.40

														Pro Forma
		Historical												Equivalent
						Partners				Pro Forma				Partners
		M&T				Trust				Combined				Trust Share(2)
		(per common share)
Basic Earnings
For the six months ended June 30, 2007		$	3.59			$	0.26			$	3.59			$	0.45
For the year ended December 31, 2006			7.55				0.54				7.58				0.94
Diluted Earnings
For the six months ended June 30, 2007			3.51				0.26				3.52				0.44
For the year ended December 31, 2006			7.37				0.53				7.40				0.92
Cash Dividends
For the six months ended June 30, 2007			1.20				0.14				1.20				0.14
For the year ended December 31, 2006			2.25				0.28				2.25				0.27
Book Value
As of June 30, 2007			57.59				11.28	(1)			58.65				7.27
As of December 31, 2006			56.94				11.22	(1)			57.99				7.19

(1)		Includes unallocated shares under the Partners Trust Employee Stock Ownership Plan and Trust, or ESOP.

(2)		Exclusive of the number of shares of Partners Trust common stock assumed to be exchanged for cash.

		As of or for the Six Months
		Ended June 30,								As of or for the Year Ended December 31,
		2007				2006				2006				2005				2004				2003				2002
		(In thousands, except per share data)
Summarized Income Statement Data:
Net interest income		$	912,339			$	893,639			$	1,817,541			$	1,794,343			$	1,734,572			$	1,598,755			$	1,247,585
Provision for credit losses			57,000				35,000				80,000				88,000				95,000				131,000				122,000
Other income			519,600				515,533				1,045,852				949,718				942,969				831,095				511,931
Other expense			791,688				759,000				1,551,751				1,485,142				1,516,018				1,448,180				961,611
Income taxes			193,109				199,682				392,453				388,736				344,002				276,728				219,153
Net income			390,142				415,490				839,189				782,183				722,521				573,942				456,752
Per Common Share Data:
Basic net income		$	3.59			$	3.73			$	7.55			$	6.88			$	6.14			$	5.08			$	4.94
Diluted net income			3.51				3.64				7.37				6.73				6.00				4.95				4.78
Book value at end of period			57.59				54.01				56.94				52.39				49.68				47.55				34.82
Cash dividends			1.20				1.05				2.25				1.75				1.60				1.20				1.05
Weighted Average Number of Shares:
Basic			108,811				111,474				111,173				113,689				117,696				113,010				92,483
Diluted			111,046				114,157				113,918				116,232				120,406				115,932				95,522
Average Balance Sheet Data:
Total assets		$	57,365,919			$	55,302,935			$	55,839,101			$	54,134,983			$	51,516,603			$	45,349,219			$	31,935,299
Total borrowings			12,813,607				10,550,778				10,542,908				11,301,850				10,974,144				10,349,048				7,286,590
Shareholders’ equity			6,220,935				5,916,623				6,041,469				5,797,823				5,700,781				4,940,554				3,026,386

		As of or for the Six
		Months Ended June 30,								As of or for the Year Ended December 31,
		2007				2006				2006				2005				2004				2003				2002
		(In thousands, except per share data)
Summarized Income Statement Data:
Net interest income		$	35,912			$	44,501			$	83,511			$	99,531			$	69,292			$	46,607			$	35,264
(Recovery of) provision for credit losses			—				(2,627	)			(4,951	)			(9,006	)			1,160				1,100				1,150
Other income			17,967				11,085				23,404				22,854				13,840				11,138				6,847
Other expense			38,121				40,336				77,693				79,938				64,143				35,331				28,731
Income taxes			4,894				5,547				10,649				18,646				5,689				7,268				3,818
Net income			10,864				12,330				23,524				32,807				12,140				14,046				8,412
Per Common Share Data:
Basic net income		$	0.26			$	0.27			$	0.54			$	0.69			$	0.34			$	0.53			$	0.23
Diluted net income			0.26				0.27				0.53				0.68				0.33				0.52				0.23
Book value at end of period(1)			11.28				10.81				11.22				10.87				10.87				12.35				11.65
Cash dividends			0.14				0.14				0.28				0.28				0.24				0.17				0.05
Weighted Average Number of Shares:
Basic			41,824				44,909				43,619				47,556				36,003				26,389				26,675
Diluted			42,571				45,605				44,348				48,497				36,850				26,814				26,721
Average Balance Sheet Data:
Total assets		$	3,698,968			$	3,828,440			$	3,792,710			$	3,710,984			$	2,400,479			$	1,295,661			$	1,020,417
Total borrowings(2)			922,472				912,135				930,950				840,105				538,482				277,548				260,685
Shareholders’ equity			496,070				514,488				503,514				544,629				347,002				171,769				148,323

 

 

 

 

RISK FACTORS

 

In addition to the other information contained in or incorporated by reference into this proxy statement/prospectus, including the matters addressed under the heading “Forward-Looking Statements” beginning on page 64, you should carefully consider the following risk factors in deciding how to vote on the merger agreement and the merger.

 

Partners Trust Will Be Subject to Business Uncertainties and Contractual Restrictions while the Merger is Pending.

 

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on Partners Trust and consequently on M&T. These uncertainties may impair Partners Trust’s ability to attract, retain and motivate key personnel until the merger is consummated, and could cause customers and others that deal with Partners Trust to seek to change existing business relationships with Partners Trust. Retention of certain employees may be challenging during the pendency of the merger, as certain employees may experience uncertainty about their future roles with M&T. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with M&T, M&T’s business following the merger could be harmed. In addition, the merger agreement restricts Partners Trust from making certain acquisitions and taking other specified actions until the merger occurs without the consent of M&T. These restrictions may prevent Partners Trust from pursuing attractive business opportunities that may arise prior to the completion of the merger. Please see the section entitled “The Merger Agreement — Conduct of Business Pending the Merger” beginning on Page 41 of this proxy statement/prospectus for a description of the restrictive covenants to which Partners Trust is subject.

 

Combining Our Two Companies May Be More Difficult, Costly or Time-Consuming than We Expect.

 

M&T and Partners Trust have operated and, until merger completion, will continue to operate, independently. It is possible that the integration process could result in the loss of key employees or disruption of each company’s ongoing business or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with customers and employees or to achieve the anticipated benefits of the merger. As with any merger of banking institutions, there also may be business disruptions that cause us to lose customers or cause customers to take their deposits out of our banks. The success of the combined company following the merger may depend in large part on the ability to integrate the two businesses, business models and cultures. If we are not able to integrate our operations successfully and timely, the expected benefits of the merger may not be realized.

 

If the Merger Is Not Consummated by May 18, 2008, Either M&T or Partners Trust May Choose Not to Proceed with the Merger.

 

Either M&T or Partners Trust may terminate the merger agreement if the merger has not been completed by May 18, 2008, unless the failure of the merger to be completed has resulted from the failure of the party seeking to terminate the merger agreement to perform its obligations.

 

The Value of M&T Common Stock to be Received by Partners Trust Stockholders as a Part of the Merger Consideration might Decrease after the Closing and before Partners Trust Stockholders Receive such Shares.

 

Each share of Partners Trust common stock entitles the holder to receive, at the election of such holder, either $12.50 in cash or a fraction of a share of M&T common stock equal to $12.50 divided by the average closing price on the NYSE of M&T common stock for the five trading days immediately prior to the completion date of the merger. However, to the extent that such holder is entitled to receive shares of M&T common stock as part of the merger consideration, the value of such shares of M&T common stock might decrease after the closing of the merger and before Partners Trust stockholders actually receive such shares due to fluctuation of the M&T common stock price on the NYSE. For a discussion of the procedures by which shares of M&T common stock will be issued following completion of the merger, see the section entitled “The Merger Agreement — Merger Consideration — Exchange Procedures” on page 39.

 

The Market Price of M&T Common Stock after the Merger May Be Affected by Factors Different from Those Affecting Partners Trust Common Stock or M&T Common Stock Currently.

 

The businesses of M&T and Partners Trust differ in some respects and, accordingly, the results of operations of the combined company and the market price of M&T’s shares of common stock after the merger may be affected by factors different from those currently affecting the independent results of operations of each of M&T or Partners

Trust. For a discussion of the businesses of M&T and Partners Trust and of certain factors to consider in connection with those businesses, see the documents incorporated by reference into this proxy statement/prospectus and referred to under “Where You Can Find More Information.”

 

Partners Trust Stockholders May Receive a Form of Consideration Different from What They Elect.

 

Although each Partners Trust stockholder may elect to receive all cash, all M&T common stock or a combination thereof in the merger, the cash and stock elections are subject to proration and adjustment to preserve the proportion of the aggregate number of M&T shares to be issued to the aggregate cash consideration to be paid in the merger. As a result, even if you make an all cash election or an all stock election, you may nevertheless receive a mix of cash and stock consideration. In addition, if you elect to receive a combination of stock and cash, you may not receive the desired mix.

 

If You Tender Shares of Partners Trust Common Stock to Make an Election (or Follow the Procedures for Guaranteed Delivery), You Will Not Be Able to Sell those Shares, Unless You Revoke Your Election prior to the Election Deadline.

 

You will receive an election form and other materials relating to your right to elect the form of merger consideration under the merger agreement and will be requested to send to the exchange agent your Partners Trust stock certificates (or follow the procedures for guaranteed delivery) together with the properly completed election form. If you want to make a cash or stock election, you must deliver your stock certificates (or follow the procedures for guaranteed delivery) and a properly completed and signed form of election to the exchange agent by the election deadline, which will be specified in the form of election. The election deadline is set for 5 p.m. on the date of closing. If you hold Partners Trust stock options and you wish to make an election as to the form of merger consideration, you must have exercised your options before the election deadline.

 

You will not be able to sell any shares of Partners Trust common stock that you have delivered, unless you revoke your election before the deadline by providing written notice to the exchange agent. If you do not revoke your election, you will not be able to liquidate your investment in Partners Trust common stock for any reason until you receive cash and/or M&T common stock in the merger. In the time between delivery of your shares and the completion of the merger, the trading price of Partners Trust or M&T common stock may decrease, and you might otherwise want to sell your shares of Partners Trust to gain access to cash, make other investments, or reduce the potential for a decrease in the value of your investment.

 

The date that you will receive your merger consideration depends on the completion date of the merger, which is uncertain. The completion date of the merger might be later than expected due to unforeseen events, such as delays in obtaining regulatory approvals.

 

Regulatory Approvals May Not Be Received, May Take Longer than Expected or Impose Conditions that Are Not Presently Anticipated.

 

The Board of Governors of the Federal Reserve System and the New York State Banking Department must approve, or waive the approval of, the merger and related transactions. The Board of Governors of the Federal Reserve System and the New York State Banking Department will consider, among other factors, the competitive impact of the merger, the financial and managerial resources of our companies and our subsidiary banks and the convenience and needs of the communities to be served. As part of that consideration, we expect that the Board of Governors of the Federal Reserve System and the New York State Banking Department will review capital position, safety and soundness, and legal and regulatory compliance, including compliance with anti-money laundering laws.

 

There can be no assurance as to whether this and other regulatory approvals will be received, the timing of those approvals, or whether any conditions will be imposed.

 

Some of the Directors and Executive Officers of Partners Trust May Have Interests and Arrangements that May Have Influenced their Decisions to Support or Recommend that You Approve the Merger.

 

The interests of some of the directors and executive officers of Partners Trust may be different from those of Partners Trust stockholders, and directors and officers of Partners Trust may be participants in arrangements that are different from, or in addition to, those of Partners Trust stockholders. These interests are described in more detail in the section of this proxy statement/prospectus entitled “Interests of Certain Persons in the Merger” beginning on Page 32.

The Merger Agreement Limits Partners Trust’s Ability to Pursue Alternatives to the Merger.

 

The merger agreement contains provisions that limit Partners Trust’s ability to discuss competing third-party proposals to acquire all or a significant part of Partners Trust. These provisions, which include a $20,828,000 termination fee payable under certain circumstances, might discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of Partners Trust from considering or proposing that acquisition even if it were prepared to pay consideration with a higher per share market price than that proposed in the merger, or might result in a potential competing acquiror proposing to pay a lower per share price to acquire Partners Trust than it might otherwise have proposed to pay.

 

We May Fail to Realize the Cost Savings Estimated For the Merger.

 

M&T estimates to achieve more than 50% annual cost savings from the merger when fully phased in. While M&T continues to be comfortable with these estimates as of the date of this proxy statement/prospectus, it is possible that the estimates of the potential cost savings could turn out to be incorrect. The cost savings estimates also depend on our ability to combine the businesses of M&T and Partners Trust in a manner that permits those costs savings to be realized. If the estimates turn out to be incorrect or M&T is not able to combine successfully our two companies, the anticipated cost savings may not be fully realized or realized at all, or may take longer to realize than expected.

 

The Shares of M&T Common Stock To Be Received by Partners Trust Stockholders as a Result of the Merger Will Have Different Rights from the Shares of Partners Trust Common Stock.

 

The rights associated with Partners Trust common stock are different from the rights associated with M&T common stock. See the section of this proxy statement/prospectus entitled “Comparison of Shareholder Rights” on Page 57 for a discussion of the different rights associated with M&T common stock.

 

PARTNERS TRUST SPECIAL MEETING

 

This section contains information from Partners Trust for Partners Trust stockholders about the special meeting Partners Trust has called to consider and adopt the merger agreement and approve the merger and the other transactions contemplated thereby. We are mailing this proxy statement/prospectus to you, as a Partners Trust stockholder, on or about October 22, 2007. Together with this proxy statement/prospectus, we are also sending to you a notice of the Partners Trust special meeting and a form of proxy card that our board is soliciting for use at the special meeting of Partners Trust stockholders and at any adjournments or postponements of the meeting. The special meeting will be held on November 21, 2007, at 9:00 a.m. local time, at the Renaissance Syracuse Hotel, located at 701 East Genesee Street, Syracuse, New York 13210.

 

This proxy statement/prospectus is also being furnished by M&T to Partners Trust stockholders as a prospectus in connection with the issuance of shares of M&T common stock upon consummation of the merger.

 

Matters To Be Considered

 

The only matter to be considered at the Partners Trust special meeting is the adoption of the merger agreement. You may also be asked to vote upon a proposal to adjourn or postpone the special meeting. Partners Trust could use any adjournment or postponement of the special meeting for the purpose, among others, of allowing more time to solicit votes to adopt the merger agreement and approve the merger.

 

Record Date

 

The Partners Trust board has fixed the close of business on September 24, 2007, as the record date for determining the Partners Trust stockholders entitled to receive notice of and to vote at the special meeting. Only Partners Trust stockholders of record as of the record date are entitled to notice of and to vote at the special meeting. As of the record date, 43,581,326 shares of Partners Trust common stock were issued and outstanding and held by approximately 4,884 record holders. Partners Trust stockholders are entitled to one vote on each matter considered and voted on at the special meeting for each share of Partners Trust common stock held of record at the close of business on the record date. The presence, in person or by properly executed proxy, of the holders of a majority of the shares of Partners Trust common stock entitled to vote at the special meeting is necessary to constitute a quorum at the special meeting. For purposes of determining the presence of a quorum, abstentions will be counted as shares present but shares represented by a proxy from a broker or nominee indicating that such person has not received instructions from the beneficial owner or other person entitled to vote the shares, which we refer to as “broker non-votes”, will not be counted as shares present. Neither abstentions nor broker non-votes will be counted as votes cast for purposes of determining whether a proposal has received sufficient votes for approval.

 

Action Required

 

Adoption of the merger agreement and approval of the merger requires the affirmative vote of a majority of the outstanding shares of Partners Trust common stock. The merger agreement and the consummation of the transactions contemplated therein will not require the approval of the holders of M&T common stock under the New York Business Corporation Law or the rules of the NYSE.

 

As of the record date, Partners Trust directors and executive officers and their affiliates held about 3,726,885 shares (or approximately 8.6% of the outstanding shares) of Partners Trust common stock entitled to vote at the special meeting.

 

As of the record date, M&T held no shares of Partners Trust common stock (other than shares held as fiduciary, custodian or agent as described below) and its directors and executive officers or their affiliates held about 83,422 shares (or approximately 0.19% of the outstanding shares) of Partners Trust common stock. See “The Merger — Interests of Certain Persons in the Merger”. Subsidiaries of M&T, as fiduciaries, custodians or agents, held a total of approximately 31,623 shares of Partners Trust common stock, representing approximately 0.07% of the shares entitled to vote at the Partners Trust special meeting, and maintained sole or shared voting power over approximately 7,574 of these shares.

 

Solicitation

 

Proxies are being solicited by the Partners Trust board from Partners Trust stockholders. Shares of Partners Trust common stock represented by properly executed proxies, and that have not been revoked, will be voted in accordance with the instructions indicated on the proxies. If no instructions are indicated, such proxies will be voted “FOR” adoption of the merger agreement and approval of the merger and the other transactions contemplated

thereby and in the discretion of the individuals named as proxies as to any other matter that may come before the special meeting including, among other things, a motion to adjourn or postpone the special meeting to another time and/or place for the purpose of soliciting additional proxies or otherwise. However, no proxy that is voted against the proposal to adopt the merger agreement and approve the merger and the transactions contemplated thereby will be voted in favor of any such adjournment or postponement.

 

M&T has agreed to pay for the costs and expenses (excluding the fees and disbursements of counsel, financial advisors and accountants) of copying, printing and distributing this proxy statement/prospectus and all listing, filing or registration fees, including without limitation, fees paid for filing the registration statement of which this proxy statement/prospectus is a part with the SEC and any other fees paid for filings with governmental authorities. In addition to the solicitation of proxies by mail, solicitation may be made by certain directors, officers or employees of Partners Trust or its affiliates telephonically, electronically or by other means of communication and by Morrow & Co., which Partners Trust has hired to assist in the solicitation and distribution of proxies for the merger and the special meeting. Directors, officers and employees will receive no additional compensation for such solicitation. Partners Trust will pay Morrow & Co., Inc. a fee of approximately $6,500 for its services. M&T will reimburse brokers and other nominees for costs incurred by them in mailing proxy materials to beneficial owners in accordance with applicable rules.

 

Proxies

 

A Partners Trust stockholder who has given a proxy may revoke it at any time before its exercise at the special meeting by (i) giving written notice of revocation to William C. Craine, Chairman of the Board of Partners Trust, (ii) properly submitting to Partners Trust a duly executed proxy bearing a later date or (iii) attending the special meeting and voting in person. All written notices of revocation and other communications with respect to revocation of proxies should be addressed to Partners Trust as follows: 233 Genesee Street, Utica, New York 13501, Attention: William C. Craine, Chairman of the Board.

 

Recommendation of Partners Trust’s Board

 

All Partners Trust directors present at a special meeting convened for this purpose have unanimously adopted the merger agreement and approved the merger. The Partners Trust board believes that these items and the transactions they contemplate are in the best interests of Partners Trust and its stockholders, and unanimously recommends that Partners Trust stockholders vote “FOR” adoption of the merger agreement and approval of the merger and the transactions contemplated thereby.

 

See the sections of this proxy statement/prospectus entitled “Reasons for the Merger” and “Recommendations of the Board of Partners Trust” on pages 19 and 17, respectively, for a more detailed discussion of the Partners Trust board’s recommendation with regard to the merger agreement, the merger and the transactions contemplated thereby.

 

THE MERGER

 

Background of the Merger

 

The Partners Trust Board of Directors has periodically conducted strategic reviews with the Partners Trust executive management team and occasionally its outside advisors, and has regularly evaluated the Company’s performance and prospects in light of competitive and other relevant developments. These strategic reviews focused on, among other things, the business environment facing Partners Trust in its market area, including opportunities for growth and enhancing performance, as well as the business environment for financial institutions generally, including ongoing consolidation in the industry.

 

Because Partners Trust did a “second step conversion” to the stock form of ownership from a mutual association in July 2004, as a general matter, no person could acquire beneficial ownership of more than 10% of its common stock for three years from the conversion date without the prior written approval of the OTS. However, as the Chairman of the New York Bankers Association in 2005 and 2006 and in the general conduct of business, Mr. Zawadzki has had regular occasion to meet with numerous financial institution executive officers and directors. Among those many meetings, Mr. Zawadzki had the occasion to meet with Robert G. Wilmers, Chairman of the Board and Chief Executive Officer of M&T, in June and December 2006. At the December meeting, Mr. Wilmers raised the possibility of a business combination following the expiration of Partners Trust’s three-year moratorium period. However, in light of that moratorium, no discussions in that regard were pursued at that time.

As expiration of this effective moratorium on an acquisition of Partners Trust was approaching, on February 28, 2007, the Board of Directors met with representatives from Sandler O’Neill to discuss the current operating environment, including economic, industry and market conditions, and Partners Trust’s current franchise performance and prospects. Following the Company’s annual meeting of stockholders on April 25, 2007, the Board of Directors met again with representatives of Sandler O’Neill as well as Hogan & Hartson LLP, legal counsel to Partners Trust. Sandler O’Neill provided an update on the current environment, including the environment for mergers and acquisitions, and again reviewed the financial performance and prospects of the Company. Sandler O’Neill also presented an overview of selected potential partners, including their financial capacity to undertake an acquisition of the Company and an assessment of their likely interest in doing so based on Sandler O’Neill’s general knowledge of the parties and their acquisition interests. The Board of Directors discussed market, industry and economic factors that could affect performance and achievement of Partners Trust’s strategic plan. The Partners Trust Board of Directors also discussed issues to consider in evaluating potential strategic partners, including the Board of Directors’ fiduciary and legal obligations in considering such a transaction. Based on this review, the Board of Directors confirmed its intention to continue to pursue an independent business plan, but in view of the potentially significant value to Partners Trust’s stockholders of a possible business combination with M&T, and M&T’s apparent financial and regulatory ability to conclude a transaction, the Board authorized management to work with the Company’s outside advisors to evaluate a potential transaction, in particular with M&T.

 

On May 10, 2007, Mr. Zawadzki met with Mr. Wilmers in New York City. During this meeting, Mr. Wilmers again expressed a desire to explore a possible business combination between M&T and Partners Trust following the expiration of Partners Trust’s three-year moratorium period. On May 17, 2007, M&T executed a confidentiality agreement with regard to the sharing of information relating to Partners Trust in connection with a possible transaction. Thereafter, Partners Trust began to share non-public business and financial information with M&T through Sandler O’Neill.

 

On June 14, 2007, the Partners Trust Board of Directors met to discuss alternative strategies. These included a stand-alone strategy based on the current and possible alternative business plans, as well as possible acquisition strategies by various potential acquirers, including M&T. Following questions and discussions among those in attendance, the Partners Trust Board of Directors authorized further exploration of strategic options for Partners Trust, with particular focus on a transaction with M&T.

 

During the period from June 18 to 22, 2007, Sandler O’Neill had various preliminary discussions with representatives of M&T regarding the non-public business and financial information provided under the confidentiality agreement and potential ranges of valuation in an acquisition transaction. On June 26, 2007, Mr. Wilmers called Mr. Zawadzki to express M&T’s interest in pursuing a transaction at $12.50 per Partners Trust share. This indication of interest was non-binding and subject to numerous contingencies, including a review of additional financial information, satisfactory completion of M&T’s due diligence examination, and the negotiation of a definitive agreement between the parties.

 

On June 27, 2007, the Partners Trust Board of Directors met to consider the expression of interest from M&T. Sandler O’Neill presented an updated preliminary valuation of the Company, an overview of M&T and a review of the financial aspects of M&T’s proposal. A representative from Hogan & Hartson LLP advised the Board of Directors of its fiduciary and other obligations. Subject to legal and regulatory conditions, the Board authorized management to commence discussions and negotiations with M&T. Based on this authorization, and because the three-year moratorium had not yet expired, Mr. Zawadzki sought and obtained clearance from the OTS for discussions and negotiations with M&T, including allowing M&T to conduct due diligence prior to the expiration of the moratorium.

 

On July 9 and 10, 2007, M&T conducted due diligence with respect to Partners Trust. In addition, under the direction of Partners Trust executive management, Sandler O’Neill commenced detailed discussions and negotiations with representatives of M&T as to M&T’s proposal. Legal counsel for Partners Trust received the first draft of a merger agreement from legal counsel to M&T on July 11, 2007. Under the direction of Partners Trust executive management, legal counsel for Partners Trust began negotiations with M&T’s attorneys with regard to the merger agreement and continued such negotiations during the period from July 11 through July 18, 2007.

 

On July 11, 2007, while attending a New York Bankers Association meeting, the chief executive officer of another potential strategic partner (which had been part of Sandler O’Neil’s preliminary analyses and presentations)

indicated to Mr. Zawadzki that he would like to discuss a potential acquisition transaction following the expiration of Partners Trust’s three-year moratorium.

 

On July 16, 2007, Partners Trust conducted on-site due diligence at M&T’s headquarters. The Partners Trust Board of Directors also met telephonically to discuss the status of negotiations with M&T as well as the informal inquiry received by Mr. Zawadzki. Sandler O’Neill presented an overview of the alternative strategic partner, including its prior acquisition history, a preliminary analysis of its financial capacity to undertake an acquisition of the Company and its ability to consummate a transaction. Management updated the Board of Directors on the status of discussions with M&T, including the proposed stock and cash components of the consideration to be offered to Partners Trust stockholders. Representatives of Sandler O’Neill reported on certain preliminary financial analyses with respect to the proposed transaction based on a range of alternative mixes of cash and stock consideration. The Partners Trust Board also considered other factors with respect to the alternative strategic partner, including its past stock performance, overall stock risk profile, and other metrics, and compared the alternative strategic partner to M&T with regard to each of these factors. After significant discussion with the company’s financial and legal advisors and executive management, the Partners Trust Board determined not to pursue discussions with the alternative strategic partner and instead to continue discussions with M&T.

 

On July 17, 2007, Mr. Zawadzki met with Mr. Wilmers in Buffalo, New York to discuss certain open issues with respect to the proposed transaction.

 

On July 18, 2007, the Partners Trust Board of Directors met to consider the proposed strategic transaction with M&T and the terms of the definitive agreement negotiated by management. Legal counsel advised the Partners Trust Board of Directors of its fiduciary duties and reviewed the terms of the merger agreement, including those terms that had been finalized since the Board of Directors’ last meeting. Mr. Zawadzki provided a summary of his July 17th discussions with Mr. Wilmers. A representative from Sandler O’Neill presented an updated financial analysis with respect to the proposal, including the financial terms of the proposed transaction, an updated review of Partners Trust and M&T, an analysis of comparable transactions and an analysis of the pro forma financial impact of the transaction on M&T and on Partners Trust’s stockholders, based on transaction assumptions discussed with Partners Trust’s executive management. Executive management and representatives from Sandler O’Neill and Hogan & Hartson LLP answered questions from the Partners Trust Board of Directors regarding specific details of the offer. The results of the due diligence conducted on M&T were described for the Partners Trust Board of Directors. The directors engaged in a comprehensive discussion about the transaction. At this time, Sandler O’Neill orally expressed its opinion that the consideration proposed to be paid to Partners Trust’s stockholders under the draft merger agreement was fair from a financial point of view. Also at this meeting, Sandler O’Neill reviewed its analysis of the alternative strategic partner discussed at the July 16th telephonic Partners Trust Board of Directors meeting.

 

The Partners Trust Board of Directors discussed the draft merger agreement, the alternative strategic partner and Sandler O’Neill’s analysis at length, as well as market, industry and economic factors potentially affecting Partners Trust’s strategic plan. Following the discussion, the Partners Trust Board of Directors expressed its view that, based upon its careful review and Sandler O’Neill’s fairness review and opinion, the proposed merger was in the best interest of Partners Trust’s stockholders. The Partners Trust Board of Directors also considered its fiduciary responsibilities to stockholders and determined that the negotiated termination fee would not unreasonably preclude other interested parties from submitting offers to acquire Partners Trust. Thereafter, the Partners Trust Board of Directors unanimously approved the merger of Partners Trust and M&T and the merger agreement, and voted to recommend the adoption of the merger agreement to Partners Trust’s stockholders.

 

That evening, following the market close, the parties executed the definitive merger agreement, and the transaction was publicly announced the next morning, on July 19, 2007. Sandler O’Neill subsequently delivered to the Partners Trust Board of Directors its written fairness opinion, dated July 18, 2007, confirming its oral opinion rendered at the July 18th Board meeting.

 

Reasons for the Merger

 

The Partners Trust Board of Directors has determined that the merger agreement and the transactions contemplated thereby are advisable and in the best interests of Partners Trust and its stockholders. Accordingly, the Partners Trust Board of Directors has unanimously approved the merger agreement and determined to recommend that Partners Trust’s stockholders approve and adopt the merger agreement.

 

In reaching its decision to approve the merger agreement and recommend the merger to its stockholders, the Partners Trust Board of Directors consulted with Partners Trust’s executive management, as well as its outside financial and legal advisors, and considered a number of factors, including:

 

 

The foregoing discussion of the factors considered by the Partners Trust Board of Directors is not intended to be exhaustive. In reaching its decision to approve the merger agreement, the Partners Trust 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. The Partners Trust Board of Directors considered all these factors as a whole, and overall considered them to be favorable to, and to support, its determination.

 

The Partners Trust Board of Directors unanimously determined that the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of Partners Trust and its stockholders and unanimously approved the merger agreement. The Partners Trust Board of

Directors unanimously recommends that the stockholders of Partners Trust vote “FOR” adoption of the merger agreement.

 

Opinion of Partners Trust’s Financial Advisor

 

Opinion of Partners Trust’s Financial Advisor.  Since the completion of the Company’s conversion to a public company in 2004, Partners Trust’s Board of Directors and executive management have met periodically with representatives of Sandler O’Neill to discuss the overall economic environment and industry and market conditions, as well as Partners Trust’s franchise performance, strategies and prospects. By letter agreement, dated June 27, 2007, Partners Trust retained Sandler O’Neill to act as its financial advisor in connection with a possible business combination. Sandler O’Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Sandler O’Neill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

 

Sandler O’Neill acted as financial advisor to Partners Trust in connection with the proposed merger with M&T and participated in certain of the negotiations leading to the merger agreement. At the July 18, 2007 meeting at which Partners Trust’s Board of Directors considered and approved the merger agreement, Sandler O’Neill delivered to the Board of Directors its oral opinion, subsequently confirmed in writing that, as of such date, the merger consideration was fair to Partners Trust’s stockholders from a financial point of view. The full text of Sandler O’Neill’s opinion is attached as Appendix B to this document. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the opinion. Partners Trust stockholders are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.

 

Sandler O’Neill’s opinion speaks only as of the date of the opinion and was necessarily based upon financial, economic, market and other conditions as they existed, and could be evaluated, on that date. Sandler O’Neill has not undertaken to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date of the opinion. The opinion is directed to the Partners Trust Board of Directors and speaks only to the fairness of the merger consideration to Partners Trust stockholders from a financial point of view. It does not address the underlying business decision of Partners Trust to engage in the merger or any other aspect of the merger and is not a recommendation to any Partners Trust stockholder as to how such stockholder should vote at the special meeting with respect to the merger, the form of consideration such stockholder should elect, or any other matter.

 

In connection with rendering its July 18, 2007 opinion, Sandler O’Neill reviewed and considered, among other things:

 

(1) the merger agreement;

 

(2) certain publicly available financial statements and other historical financial information of Partners Trust that Sandler O’Neill deemed relevant;

 

(3) certain publicly available financial statements and other historical financial information of M&T that Sandler O’Neill deemed relevant;

 

(4) internal operating budget for Partners Trust for the year ending December 31, 2007 and summary financial projections based on earnings and growth assumptions reviewed with senior management of Partners Trust;

 

(5) publicly available earnings estimates for M&T for the years ending December 31, 2007 and 2008 and an estimated long term earnings growth rate for the years thereafter, in each case as published by IBES and discussed with senior management of M&T;

 

(6) the pro forma financial impact of the merger on M&T, based on assumptions relating to transaction expenses, purchase accounting adjustments and cost savings discussed with Partners Trust and M&T;

 

(7) the publicly reported historical price and trading activity for Partners Trust’s and M&T’s common stock, including a comparison of certain financial and stock market information for Partners Trust and M&T with similar publicly available information for certain other companies the securities of which are publicly traded;

 

(8) the financial terms of certain recent business combinations in the thrift industry, to the extent publicly available;

(9) the current market environment generally and the banking environment in particular; and

 

(10) such other information, financial studies, analyses and investigations and financial, economic and market criteria as Sandler O’Neill considered relevant.

 

Sandler O’Neill also discussed with certain members of Partners Trust’s executive management the business, financial condition, results of operations and prospects of Partners Trust and held similar discussions with certain members of senior management of M&T regarding the business, financial condition, results of operations and prospects of M&T. In connection with its engagement, Sandler O’Neill was not asked to, and did not, solicit indications of interest in a potential transaction from other third parties.

 

In performing its reviews and analyses, Sandler O’Neill relied upon the accuracy and completeness of all of the financial and other information that was available to it from public sources, that was provided by Partners Trust and M&T or their respective representatives or that was otherwise available to Sandler O’Neill and assumed such accuracy and completeness for purposes of rendering its opinion. Sandler O’Neill further relied on the assurances of senior management of Partners Trust and M&T that they were not aware of any facts or circumstances that would make any of such information inaccurate or misleading. Sandler O’Neill was not asked to, and did not, undertake an independent verification of any of such information and Sandler O’Neill did not assume any responsibility or liability for the accuracy or completeness thereof. Sandler O’Neill did not make an independent evaluation or appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of Partners Trust or M&T or any of their subsidiaries, or the collectibility of any such assets, nor was Sandler O’Neill furnished with any such evaluations or appraisals. Sandler O’Neill is not an expert in the evaluation of allowances for loan losses and it did not make an independent evaluation of the adequacy of the allowance for loan losses of Partners Trust or M&T, nor did Sandler O’Neill review any individual credit files relating to Partners Trust or M&T. Sandler O’Neill assumed, with Partners Trust’s consent, that the respective allowances for loan losses for both Partners Trust and M&T were adequate to cover such losses and will be adequate for the combined company.

 

Sandler O’Neill also assumed that there had been no material change in Partners Trust’s and M&T’s assets, financial condition, results of operations, business or prospects since the date of the last financial statements made available to them, that Partners Trust and M&T would remain as going concerns for all periods relevant to its analyses, that all of the representations and warranties contained in the merger agreement were true and correct, that each party to the merger agreement would perform all of the covenants required to be performed by such party under that agreement, that the conditions precedent in the merger agreement will not be waived and that the merger will qualify as a tax-free reorganization for federal income tax purposes. Finally, as to all legal, accounting and tax matters relating to the merger agreement and the merger, Partners Trust relied on the advice received from its legal, accounting, and tax advisors and instructed Sandler O’Neill to assume the accuracy and completeness of that advice in performing its analyses and rendering its opinion.

 

In rendering its opinion, Sandler O’Neill performed a variety of financial analyses. Sandler O’Neill prepared its analyses solely for purposes of rendering its opinion and provided such analyses to the Partners Trust Board of Directors at the Board’s July 18, 2007 meeting. The summary below is not a complete description of the analyses underlying Sandler O’Neill’s opinion or the presentation made by Sandler O’Neill to the Partners Trust Board of Directors, but is instead a summary of the material analyses performed and presented in connection with its opinion. The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Also, no company included in Sandler O’Neill’s comparative analyses described below is identical to Partners Trust or M&T and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect their public trading values or merger transaction values. The process, therefore, is not necessarily susceptible to a partial analysis or summary description.

 

In arriving at its opinion, Sandler O’Neill did not attribute any particular weight to any analysis or factor that it considered. Rather, Sandler O’Neill made its own qualitative judgments as to the significance and relevance of each analysis and factor. The financial analyses summarized below include information presented in tabular format. Sandler O’Neill did not form an opinion as to whether any individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinion; rather Sandler O’Neill made its determination as to the fairness of the merger consideration on the basis of its experience and professional judgment after considering

the results of all the analyses taken as a whole. Accordingly, Sandler O’Neill believes that its analyses and the summary of its analyses must be considered as a whole and that selecting portions of its analyses or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying its analysis and opinion. The tables alone do not constitute complete descriptions of the financial analyses presented in such tables.

 

In performing its analysis, Sandler O’Neill assumed that the financial performances reflected in all projections and estimates used by them in their analyses would be achieved and expressed no opinion as to such projections or estimates or the assumptions on which they were based. Those estimates and projections, as well as the other estimates used by Sandler O’Neill in its analysis, were based on numerous variables and assumptions which are inherently uncertain and, accordingly, actual results could vary materially from those set forth in such projections. Sandler O’Neill also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which cannot be predicted and are beyond the control of Partners Trust, M&T and Sandler O’Neill. The analysis performed by Sandler O’Neill is not necessarily indicative of actual values or future results, both of which may be significantly more or less favorable than suggested by such analysis. Estimates on the values of companies did not purport to be appraisals or necessarily reflect the prices at which companies or their securities might actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different. Accordingly, Sandler O’Neill’s analysis does not necessarily reflect the value of Partners Trust’s common stock or M&T’s common stock or the prices at which Partners Trust’s or M&T’s common stock may be sold at any time. Sandler O’Neill’s analysis and opinion were among a number of factors taken into consideration by the Partners Trust Board of Directors in making its determination to adopt the merger agreement and the analysis described below should not be viewed as determinative of the decision of the Partners Trust Board of Directors or management with respect to the fairness of the merger.

 

Summary of Proposal.  Sandler O’Neill reviewed the financial terms of the proposed transaction. Pursuant to the merger agreement, each share of Partners Trust common stock issued and outstanding immediately prior to the merger will be converted into the right to receive either (a) $12.50 in cash or (b) shares of M&T common stock at an exchange ratio determined by reference to the 5-day average closing price of M&T’s common stock immediately prior to close. Sandler O’Neill calculated the aggregate transaction value to be $555.4 million. Based upon financial information for Partners Trust for the twelve months ended June 30, 2007, Sandler O’Neill calculated the following ratios:

 

Transaction Ratios

 

 

 

 

Stock Trading History.  Sandler O’Neill reviewed the history of the publicly reported trading prices of Partners Trust’s and M&T’s common stock. For the period commencing July 15, 2004, the first trading date following Partners Trust’s second-step conversion, and ending July 13, 2007, Sandler O’Neill compared the relative performance of Partners Trust’s common stock with the following:

 

 

 

The relative performances were as follows:

 

Partners Trust’s Stock Performance

 

 

 

 

For the three-year period ended July 16, 2007, Sandler O’Neill compared the relative performance of M&T’s common stock with the following:

 

 

The relative performances were as follows:

 

M&T’s Stock Performance

 

 

 

 

Comparable Company Analysis.  Sandler O’Neill used publicly available information to compare selected financial and market trading information for Partners Trust and M&T to various peer groups selected by Sandler O’Neill. The “Upstate New York Bank and Thrift” peer group for Partners Trust consisted of the following companies:

 

The “Mid-Atlantic Thrift” peer group for Partners Trust consisted of the following companies:

 

 

The analysis compared publicly available financial information as of and for the twelve-month period ended March 31, 2007 and market trading information as of July 17, 2007. The table below compares the data for Partners Trust with the median data for the peer groups.

 

Partners Trust Comparable Group Analysis

 

 

The “Regional Bank” peer group for M&T consisted of the following companies:

 

 

The analysis compared publicly available financial information as of and for the most recently reported twelve-month period and market trading information as of July 17, 2007. The table below compares the data for M&T with the median data for the peer group.

 

M&T Comparable Group Analysis

 

 

 

 

Analysis of Selected Merger Transactions.  Sandler O’Neill reviewed 16 merger transactions announced from January 1, 2004 through July 17, 2007 involving acquisitions of thrifts in the Mid-Atlantic region of the United States with announced transaction values greater than $50 million. Sandler O’Neill also reviewed 17 merger transactions announced from January 1, 2006 through July 17, 2007 involving acquisitions of thrifts in the United

States with announced transaction values greater than $100 million. Sandler O’Neill reviewed the multiples of transaction price at announcement to last twelve months’ reported earnings per share, last twelve months’ core earnings per share, estimated current year earnings per share and tangible book value per share, as well as tangible book premium to core deposits and current market price premium, and computed high, low, mean and median multiples and premiums for the transactions. These multiples were applied to Partners Trust’s financial information as of and for the twelve months ended June 30, 2007. As illustrated in the following table, Sandler O’Neill derived imputed ranges of values per share of Partners Trust’s common stock of $6.55 to $12.55 based upon the median multiples for the Mid-Atlantic group and $5.52 to $15.08 based upon the median multiples for the Nationwide group.

 

Comparable Transactions Analysis

 

 

 

 

Discounted Cash Flow Analysis.  Sandler O’Neill performed an analysis to estimate the future stream of after-tax cash flows that Partners Trust would provide to equity holders through 2010 on a stand-alone basis, assuming Partners Trust’s annual dividend remained at $0.28 per share and that Partners Trust performed in accordance with the earnings and growth assumptions reviewed with Partners Trust’s management. To approximate the terminal value of Partners Trust common stock at December 31, 2010, Sandler O’Neill applied price/earnings multiples ranging from 14x to 22x and multiples of tangible book value ranging from 140% to 260%. The dividend stream and terminal values were then discounted to present values using discount rates ranging from 9% to 13%, which were selected by Sandler O’Neill to reflect different assumptions regarding required rates of return of holders or prospective buyers of Partners Trust’s common stock. This analysis resulted in the following reference ranges of indicated per share values for Partners Trust’s common stock:

 

Terminal Earnings Multiple

 

 

Terminal Tangible Book Multiple

 

Sandler O’Neill also considered and discussed with the Partners Trust Board of Directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler O’Neill performed a similar analysis assuming Partners Trust’s 2010 net income varied from 25% above projections to 25% below projections. This analysis resulted in the following reference ranges of indicated per share values for Partners Trust’s common stock, using a discount rate of 11.10%:

 

Terminal Earnings Multiple

 

 

Sandler O’Neill performed a similar analysis to estimate the future stream of after-tax cash flows that M&T would provide to equity holders through 2010 on a stand-alone basis, assuming M&T maintained an annual dividend payout ratio of 30.5% and that M&T performed in accordance with median IBES earnings estimates for 2007 and 2008 and increased approximately 11.5% to 12% annually thereafter. To approximate the terminal value of M&T common stock at December 31, 2010, Sandler O’Neill applied price/earnings multiples ranging from 11x to 16x. The dividend stream and terminal values were then discounted to present values using discount rates ranging from 9% to 13%, which were selected by Sandler O’Neill to reflect different assumptions regarding required rates of return of holders or prospective buyers of M&T common stock. This analysis resulted in the following reference ranges of indicated per share values for M&T common stock:

 

Terminal Earnings Multiple

 

Sandler O’Neill performed a similar analysis assuming M&T’s 2010 net income varied from 15% above to 15% below the estimates noted above. This analysis resulted in the following reference ranges of indicated per share values for M&T’s common stock, using a discount rate of 10.57%:

 

Terminal Earnings Multiple

 

 

In its discussions with the Partners Trust Board of Directors, Sandler O’Neill noted that the discounted cash flow analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

 

Pro Forma Merger Analysis.  Sandler O’Neill analyzed certain potential pro forma effects of the merger, assuming: (1) the exchange ratio for the stock portion of the merger consideration was 0.1109 (based on the closing price of M&T’s common stock on July 17, 2007); (2) all “in the money” options to purchase shares of Partners Trust common stock outstanding at June 30, 2007 remain outstanding through the closing of the merger and are cashed out at the difference between $12.50 and the exercise price of the option at the closing of the merger; (3) each of Partners Trust and M&T performs in accordance with the earnings projections and estimates discussed above; and (4) the merger closes during the fourth quarter of 2007. Sandler O’Neill also assumed various purchase accounting adjustments (including amortizable identifiable intangibles created in the merger), charges and transaction costs associated with the merger, and cost savings resulting from the merger (75% of which would be realized in 2008 and 100% in 2009), and assumed an opportunity cost of 6% for the cash portion of the merger consideration. Based on the assumptions listed above, the analysis indicated that the merger would be slightly accretive to M&T’s estimated 2008 earnings per share and approximately 1% accretive to 2009 earnings per share, and dilutive to M&T’s estimated 2008 and 2009 tangible book value per share. The actual results achieved by the combined company may vary from projected results and the variations may be material.

 

Sandler O’Neill’s Compensation and Other Relationships with Partners Trust and M&T.  Partners Trust has agreed to pay Sandler O’Neill a transaction fee in connection with the merger of 1% of the aggregate transaction value, or approximately $5.5 million, of which $1.1 million has been paid and the balance of which is contingent, and payable, upon closing of the merger. Sandler O’Neill has also received a fee of $250,000 for rendering its opinion, which will be credited against that portion of the transaction fee due upon closing of the merger. Partners Trust has also agreed to reimburse certain of Sandler O’Neill reasonable out-of-pocket expenses incurred in connection with its engagement and to indemnify Sandler O’Neill and its affiliates and their respective partners, directors, officers, employees, agents and controlling persons against certain expenses and liabilities, including liabilities under the securities laws.

 

Sandler O’Neill has provided other investment banking services to Partners Trust in the past and has received fees for such investment banking services. Sandler O’Neill has provided investment banking services to M&T in the past and has received fees for such investment banking services and may continue to provide such services in the future, including during the period prior to the closing of the merger. In the ordinary course of its business as a broker-dealer, Sandler O’Neill may purchase securities from and sell securities to Partners Trust and M&T and their affiliates. Sandler O’Neill may also actively trade the debt and/or equity securities of Partners Trust or M&T or their affiliates for its own account or for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities.

 

Material U.S. Federal Income Tax Consequences of the Merger

 

The following discussion (including the limitations and qualifications set forth therein) is based on the opinion of Hogan & Hartson LLP received by Partners Trust and the opinion of Sullivan & Cromwell LLP received by M&T, in each case, in connection with the filing of the registration statement of which this document is a part.

 

This discussion addresses the material United States federal income tax consequences of the merger to holders of Partners Trust common stock. The discussion is based on the Code, Treasury regulations, administrative rulings and judicial decisions, all as currently in effect and all of which are subject to change (possibly with retroactive effect) and to differing interpretations. This discussion applies only to Partners Trust stockholders that hold their Partners Trust common stock as a capital asset within the meaning of Section 1221 of the Code, each of which we refer to in this document as a “holder.” Further, this discussion does not address all aspects of United States federal taxation that may be relevant to a particular holder in light of its personal circumstances or to holders subject to special treatment under the United States federal income tax laws, including:

 

 

In addition, the discussion does not address any alternative minimum tax or any state, local or foreign tax consequences of the merger.

 

Each holder of Partners Trust common stock should consult its tax advisor with respect to the particular tax consequences of the merger to such holder. In addition, because each Partners Trust stockholder may receive a mix of cash and stock regardless of whether such holder makes a cash election or stock election, it will not be possible for holders of Partners Trust common stock to determine the specific tax consequences of the merger to them at the time of making the election.

 

The completion of the merger is conditioned upon the delivery by each of Hogan & Hartson LLP, counsel to Partners Trust, and Sullivan & Cromwell LLP, counsel to M&T, of its opinion to the effect that, on the basis of the facts, assumptions, and representations set forth in such opinion and certificates to be obtained from officers of Partners Trust and M&T, the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code and each of M&T and Partners Trust will be a party to the reorganization within the meaning of Section 368(b) of the Code. Neither of these opinions is binding on the Internal Revenue Service or the courts, and neither Partners Trust nor M&T intends to request a ruling from the Internal Revenue Service regarding the United States federal income tax consequences of the merger. Consequently, no assurance can be given that the Internal Revenue Service will not assert, or that a court would not sustain, a position contrary to any of those set forth below. In addition, if any of the representations or assumptions upon which such opinions are based is inconsistent with the actual facts with respect to the merger, the United States federal income tax consequences of the merger could be adversely affected. In addition, in connection with the filing of the registration statement of which this document is a part, Partners Trust has received the opinion of Hogan & Hartson LLP and M&T has received the opinion of Sullivan & Cromwell LLP, each stating that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code and that each of M&T and Partners Trust will be a party to the reorganization within the meaning of Section 368(b) of the Code.

 

The United States federal income tax consequences of the merger to a holder generally will depend on whether the holder exchanges its Partners Trust common stock for cash, M&T common stock or a combination of cash and M&T common stock.

Exchange Solely for Cash

 

In general, if, pursuant to the merger, a holder exchanges all of the shares of Partners Trust common stock actually owned by it solely for cash, that holder will recognize gain or loss equal to the difference between the amount of cash received and its adjusted tax basis in the shares of Partners Trust common stock surrendered, which gain or loss generally will be long-term capital gain or loss if the holder’s holding period with respect to the Partners Trust common stock surrendered is more than one year at the effective time of the merger. If, however, the holder constructively owns shares of Partners Trust common stock that are exchanged for shares of M&T common stock in the merger or owns shares of M&T common stock actually or constructively after the merger, the consequences to that holder may be similar to the consequences described below under the heading “— Exchange for M&T Common Stock and Cash.”

 

Exchange Solely for M&T Common Stock

 

If, pursuant to the merger, a holder exchanges all of the shares of Partners Trust common stock actually owned by it solely for shares of M&T common stock, that holder will not recognize any gain or loss except in respect of cash received in lieu of a fractional share of M&T common stock (as discussed below). The aggregate adjusted tax basis of the shares of M&T common stock received in the merger (including fractional shares deemed received and redeemed as described below) will be equal to the aggregate adjusted tax basis of the shares of Partners Trust common stock surrendered for the M&T common stock, and a holder’s holding period of the M&T common stock (including fractional shares deemed received and redeemed as described below) will include the period during which the shares of Partners Trust common stock were held.

 

Exchange for M&T Common Stock and Cash

 

If, pursuant to the merger, a holder exchanges all of the shares of Partners Trust common stock actually owned by it for a combination of M&T common stock and cash, the holder will generally recognize gain (but not loss) in an amount equal to the lesser of (1) the amount of gain realized (i.e., the excess of the sum of the amount of cash and the fair market value of the M&T common stock received pursuant to the merger over that holder’s adjusted tax basis in its shares of Partners Trust common stock surrendered) and (2) the amount of cash received pursuant to the merger. For this purpose, gain or loss must be calculated separately for each identifiable block of shares surrendered in the exchange. Holders should consult their tax advisors regarding the manner in which cash and M&T common stock should be allocated among different blocks of Partners Trust common stock. Any recognized gain will generally be long-term capital gain if the holder’s holding period with respect to the Partners Trust common stock surrendered is more than one year at the effective time of the merger. If, however, the cash received has the effect of the distribution of a dividend, the gain will be treated as a dividend to the extent of the holder’s ratable share of accumulated earnings and profits as calculated for United States federal income tax purposes. See “— Possible Treatment of Cash as a Dividend” below.

 

The aggregate tax basis of M&T common stock received (including fractional shares deemed received and redeemed as described below) by a holder that exchanges its shares of Partners Trust common stock for a combination of M&T common stock and cash pursuant to the merger will be equal to the aggregate adjusted tax basis of the shares of Partners Trust common stock surrendered for M&T common stock and cash, reduced by the amount of cash received by the holder pursuant to the merger (excluding any cash received instead of a fractional share of M&T common stock) and increased by the amount of gain (including any portion of the gain that is treated as a dividend as described below but excluding any gain or loss resulting from the deemed receipt and redemption of fractional shares described below), if any, recognized by the holder on the exchange. A holder’s holding period of the M&T common stock (including fractional shares deemed received and redeemed as described below) will include such holder’s holding period of the shares of Partners Trust common stock surrendered.

 

Possible Treatment of Cash as a Dividend

 

In general, the determination of whether the gain recognized in the exchange will be treated as capital gain or has the effect of a distribution of a dividend depends upon whether and to what extent the exchange reduces the holder’s deemed percentage stock ownership of M&T. For purposes of this determination, the holder is treated as if it first exchanged all of its shares of Partners Trust common stock solely for M&T common stock and then M&T immediately redeemed, which we refer to in this document as the “Deemed Redemption,” a portion of the M&T common stock in exchange for the cash the holder actually received. The gain recognized in the Deemed

Redemption will be treated as capital gain if the Deemed Redemption is (1) “substantially disproportionate” with respect to the holder or (2) “not essentially equivalent to a dividend.”

 

The Deemed Redemption will generally be “substantially disproportionate” with respect to a holder if the percentage described in (2) below is less than 80% of the percentage described in (1) below. Whether the Deemed Redemption is “not essentially equivalent to a dividend” with respect to a holder will depend upon the holder’s particular circumstances. At a minimum, however, in order for the Deemed Redemption to be “not essentially equivalent to a dividend,” the Deemed Redemption must result in a “meaningful reduction” in the holder’s deemed percentage stock ownership of M&T. In general, that determination requires a comparison of (1) the percentage of the outstanding stock of M&T that the holder is deemed actually and constructively to have owned immediately before the Deemed Redemption and (2) the percentage of the outstanding stock of M&T that is actually and constructively owned by the holder immediately after the Deemed Redemption. In applying the above tests, a holder may, under the constructive ownership rules, be deemed to own stock that is owned by other persons or stock underlying a holder’s option to purchase such stock in addition to the stock actually owned by the holder.

 

The Internal Revenue Service has ruled that a stockholder in a publicly held corporation whose relative stock interest is minimal and who exercises no control with respect to corporate affairs is generally considered to have a “meaningful reduction” if that stockholder has a relatively minor reduction in its percentage stock ownership under the above analysis; accordingly, the gain recognized in the exchange by such a stockholder would be treated as capital gain.

 

These rules are complex and dependent upon the specific factual circumstances particular to each holder. Consequently, each holder that may be subject to these rules should consult its tax advisor as to the application of these rules to the particular facts relevant to such holder.

 

Cash Received Instead of a Fractional Share

 

A holder who receives cash instead of a fractional share of M&T common stock will generally be treated as having received such fractional share and then as having received such cash in redemption of the fractional share. Gain or loss generally will be recognized based on the difference between the amount of cash received instead of the fractional share of M&T common stock and the portion of the holder’s aggregate adjusted tax basis of the shares of Partners Trust common stock exchanged in the merger that is allocable to the fractional share of M&T common stock. Such gain or loss generally will be long-term capital gain or loss if the holding period for such shares of Partners Trust common stock is more than one year at the effective time of the merger.

 

Reporting Requirements

 

A holder of Partners Trust common stock receiving M&T common stock as a result of the merger is required to retain records related to such holder’s Partners Trust common stock and file with its United States federal income tax return a statement setting forth facts relating to the merger.

 

Backup Withholding and Information Reporting

 

Payments of cash to a holder of Partners Trust common stock may, under certain circumstances, be subject to information reporting and backup withholding at a rate of 28% of the cash payable to the holder, unless the holder provides proof of an applicable exemption satisfactory to M&T and the exchange agent or furnishes its taxpayer identification number, and otherwise complies with all applicable requirements of the backup withholding rules. Any amounts withheld from payments to a holder under the backup withholding rules are not additional tax and will be allowed as a refund or credit against the holder’s United States federal income tax liability, provided the required information is furnished to the Internal Revenue Service.

 

Accounting Treatment

 

M&T will account for the merger as a purchase by M&T of Partners Trust under GAAP. Under the purchase method of accounting, the total consideration paid in connection with the merger is allocated among Partners Trust’s assets, liabilities and identified intangibles based on the fair values of the assets acquired, the liabilities assumed and the identified intangibles. The difference between the total consideration paid in connection with the merger and the fair values of the assets acquired, the liabilities assumed and the identified intangibles, if any, is allocated to goodwill. The results of operations of Partners Trust will be included in M&T’s results of operations from the date of acquisition.

 

Interests of Certain Persons in the Merger

 

In considering the recommendation of the Partners Trust Board of Directors to vote for the proposal to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, you should be aware that some of Partners Trust’s directors and executive officers have certain interests in, and will receive benefits from, the merger that differ from, or are in addition to (and therefore may conflict with), the interests of Partners Trust’s stockholders generally. These additional interests are described below. The Partners Trust Board of Directors was aware of these interests during their deliberations regarding the merits of the merger agreement and considered them in determining to recommend to Partners Trust’s common stockholders that they vote to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement.

 

Treatment of Stock Options, Restricted Stock and Other Stock Awards

 

Stock Options.  Pursuant to the terms of the merger agreement and the applicable option plans and agreements, each outstanding option to purchase Partners Trust common stock will, if granted pursuant to the Partners Trust Plan, become fully vested and exercisable 15 days prior to, and contingent upon, the consummation of the merger, and, if granted pursuant to the BSB Plans, become fully vested and exercisable immediately prior to, and contingent upon, the consummation of the merger. Each option to purchase Partners Trust common stock not exercised prior to the consummation of the merger will be cancelled in exchange for the right to receive an amount in cash equal to the product of (x) the total number of shares of Partners Trust common stock subject to the stock option, times (y) the excess, if any, of $12.50 over the exercise price per share under such option, less applicable taxes to be deducted and withheld with respect to such payment.

 

The following table sets forth the number of in-the-money stock options held by each of Partners Trust’s directors and executive officers as of October 16, 2007, and the dollar amount payable to each director and executive officer for those stock options upon completion of the merger, assuming that such directors and executive officers do not elect to exercise any options prior to the consummation of the merger:

 

 

 

Restricted Stock.  In accordance with the terms of the merger agreement and existing restricted stock awards and the applicable plans, any restrictions or forfeiture provisions will terminate or lapse and the restricted stock will vest in full immediately prior to the effective time of the merger and will be treated in the merger in the same manner as other shares of Partners Trust common stock. As of October 16, 2007, Partners Trust’s directors and executive officers held an aggregate of 346,896 shares of unvested restricted stock, which will vest in full immediately prior to the effective time of the merger.

 

The following table sets forth the number of shares of unvested restricted stock held by each of Partners Trust’s directors and executive officers as of October 16, 2007:

 

 

 

 

 

Arrangements with Messrs. Zawadzki and Covert

 

Each of John A. Zawadzki, Partners Trust’s President and Chief Executive Officer, and Steven A. Covert, Partners Trust’s Senior Executive Vice President and Chief Operating Officer, previously entered into employment agreements with Partners Trust that provided for certain payments in conjunction with a change in control (the “Prior Change in Control Payments”). However, in conjunction with the merger, Messrs. Zawadzki and Covert have each entered into an agreement with M&T Bank, M&T’s wholly owned subsidiary, regarding certain arrangements in connection with the transaction. Pursuant to the terms of his agreement with M&T Bank and in lieu of any Prior Change in Control Payment that would otherwise be due under his employment agreement with Partners Trust, Mr. Zawadzki will receive a cash severance payment of $2,587,654 on the six month anniversary of the effective date of the merger and a transaction bonus of $450,000 within 10 days following the closing of the merger. Pursuant to the terms of his agreement with M&T Bank, Mr. Covert’s employment with Partners Trust will terminate at the effective time of the merger and in lieu of any Prior Change in Control Payment that would otherwise be due under his employment agreement with Partners Trust, Mr. Covert will receive a cash severance payment of $1,655,027 on the six month anniversary of the effective date of the merger and a transaction bonus of $375,000 within 10 days following the closing of the merger.

 

Except for the foregoing, each of their respective employment agreements with Partners Trust remain in full force and effect, including any continuation of health and welfare benefits upon termination of employment. Pursuant to such employment agreements, if any payment to Messrs. Zawadzki or Covert would be subject to excise tax under sections 280G and 4999 of the Internal Revenue Code (the “parachute tax rules”), Partners Trust will

make an additional payment (the “gross-up payment”) equal to such excise tax plus the additional taxes (including excise tax) that result from the gross-up payment. However, if the executive’s net after-tax benefit is not at least $50,000 more than the net after-tax amount the executive would receive if payments were reduced so that no excise tax were due under the parachute tax rules, the executive’s payments will be reduced accordingly and no gross-up payment will be made. Messrs. Zawadzki and Covert would be due gross-up payments in the amounts of $2,630,478 and $986,758, respectively, based on the following assumptions: (i) the merger is completed on November 30, 2007 and the fair market value of Partners Trust’s stock at such time was $12.50; (ii) each of them is terminated effective as of the completion of the merger pursuant to their agreements with M&T; (iii) each of their outstanding employee stock options were cashed out at the effective time as described above; (iv) the surviving entity will continue to provide health and other benefits pursuant to their employment agreements having a value of $18,709 and $22,181 for Messrs. Zawadzki and Covert, respectively; (v) Mr. Zawadzki’s SERP benefits commence on the six-month anniversary of his termination in accordance with section 409A of the Internal Revenue Code; (vi) the gross-up payments are made in 2007 and subject to federal and state income taxes and FICA tax at a combined rate of 41.6025%; and (vii) the discount rates required to be used for purposes of Section 280G of the Internal Revenue Code are the same as those in effect for September 2007 (short-term, 5.71%; mid-term, 5.68%; and long-term, 6.04%), compounded semi-annually.

 

If for any reason either executive’s employment with Partners Trust terminates prior to the merger, such executive’s agreement with M&T shall terminate and M&T will not make any payment pursuant to the agreement.

 

Severance Arrangements

 

Under the terms of the employment agreements with Messrs. Callahan and O’Toole and Ms. Estrella, if the executive is terminated by the surviving entity or terminates his or her employment for good reason, in either case up to six months prior to or within two years following the completion of the merger, the executive will receive a lump sum cash payment equal to two times the average annual compensation paid to the executive by Partners Trust during the five full calendar years, or shorter period of employment, that immediately precede the year in which the merger closes. The agreements also provide for continuation of health and welfare benefits.

 

In the event the employment of Messrs. Callahan and O’Toole and Ms. Estrella is terminated as described above immediately after the completion of the merger, they will be entitled to the following severance payments:

 

 

If any amount provided to Messrs. Callahan or O’Toole or Ms. Estrella under the executive’s employment agreement would be subject to excise tax under the parachute tax rules, the surviving entity will reduce the amount of cash payable to the executive so that no amount will be subject to such excise tax. Generally, an excise tax under the parachute tax rules results when the aggregate present value of payments contingent on a change in control equal or exceed three times the executive’s average annual compensation for the prior five years. The amounts of the lump sum severance payments in connection with the merger illustrated in the table for Messrs. Callahan and O’Toole and Ms. Estrella are not affected by this limitation. The application of the limitation was determined based on the following assumptions: (i) the merger is completed on November 30, 2007 and the fair market value of Partners Trust’s stock at such time was $12.50; (ii) each of them is involuntarily terminated effective immediately after the transaction; (iii) each of their outstanding employee stock options were cashed out at the effective time as described above; (iv) the surviving entity will continue to provide health and other benefits pursuant to their employment agreements having a value of $12,748, $12,230 and $996 for Messrs. Callahan and O’Toole and Ms. Estrella, respectively; and (v) the discount rates required to be used for purposes of Section 280G of the Internal Revenue Code are the same as those in effect for September 2007 (short-term, 5.71%; mid-term, 5.68%; and long-term, 6.04%), compounded semi-annually.

 

Indemnification and Insurance

 

The merger agreement provides that the surviving corporation will indemnify, defend and hold harmless, to the extent permitted by law, the present directors and officers (when acting in such capacity) of Partners Trust against all costs or expenses, judgments, fines, losses, claims, damages or liabilities incurred by them in connection with any action arising out of such director or officer’s duties or service as a director or officer of Partners Trust and arising

out of actions or omissions occurring at or before the effective time of the merger. In the event any claim is brought against any present or former director or officer, such party may retain independent legal counsel satisfactory to that person, provided that such counsel must be reasonably acceptable to the surviving corporation. The surviving corporation will pay all reasonable fees and expenses, subject to certain qualifications, and the surviving corporation will use commercially reasonable efforts to assist in the defense of any such matter.

 

The merger agreement further provides that for six years after the effective time of the merger, M&T will cause the surviving corporation to maintain in effect directors’ and officers’ liability insurance covering persons currently covered by Partners Trust’s directors’ and officers’ liability insurance policy with respect to claims arising from facts or events that occurred before the effective time of the merger. The surviving corporation, however, will not be required to pay an annual premium in excess of 200% of the aggregate annual amounts currently paid by Partners Trust to maintain the existing policies and, if equivalent coverage cannot be obtained without exceeding the 200% threshold, the surviving corporation will only be required to obtain as much coverage as can be obtained by paying an annual premium equal to 200% of such amount.

 

The indemnification and insurance obligations described above are binding on the surviving corporation and its successors and assigns.

 

SERP Acceleration and Enhancement

 

In connection with the termination of Mr. Zawadzki’s employment as of the effective time of the merger pursuant to his agreement with M&T, Mr. Zawadzki will receive his full benefits under the Partners Trust Executive Supplemental Retirement Income Agreement, or SERP, calculated as if he had retired on his normal retirement date after receiving annual salary increases of 3% each year. Such benefits shall commence within 30 days after Mr. Zawadzki’s termination of employment or, if he is a specified employee as defined in section 409A(a)(2)(B) of the Internal Revenue Code, on the date that is six months after his termination of employment. The difference between the present value of the benefits payable upon the termination of employment in connection with the completion of the merger (assuming the merger is completed on November 30, 2007) and the present value of Mr. Zawadzki’s accumulated benefits under the SERP prior to his termination is approximately $1,172,489. The present value of Mr. Zawadzki’s accumulated benefits, approximately $1,787,893, was determined as of November 30, 2007(a) based on the assumption that Mr. Zawadzki would continue to work for Partners Trust until age 65 and would retire on July 1, 2013 (his normal retirement date as defined in the SERP) and that payments would commence on January 1, 2014 (in accordance with section 409A of the Internal Revenue Code) and (b) by taking into account his average salary for the 36 preceding months, rather than projected compensation through age 65. A discount rate of 5.875% was used, consistent with that used in Partners Trust’s financial statements.

 

THE MERGER AGREEMENT

 

The following discussion describes the material provisions of the merger agreement. We urge you to read the merger agreement, which is attached as Appendix A and incorporated by reference in this document, carefully and in its entirety. The description of the merger agreement in this proxy statement/prospectus has been included to provide you with information regarding its terms. The merger agreement contains representations and warranties made by and to the parties thereto as of specific dates. The statements embodied in those representations and warranties were made for purposes of that contract between the parties and are subject to qualifications and limitations agreed by the parties in connection with negotiating the terms of that contract. In addition, certain representations and warranties were made as of a specified date, may be subject to a contractual standard of materiality different from those generally applicable to stockholders, or may have been used for the purpose of allocating risk between the parties rather than establishing matters as facts.

 

Structure

 

Subject to the terms and conditions of the merger agreement, at the completion of the merger, Merger Sub, a wholly owned direct subsidiary of M&T, will merge with and into Partners Trust, with Partners Trust as the surviving corporation. The separate existence of Merger Sub will terminate. Immediately following the merger, M&T will cause Partners Trust, as the surviving corporation in the merger, to merge with and into M&T with M&T being the surviving corporation and continuing its existence under the laws of the State of New York. We refer to this merger as the “holdco merger.” Thereafter, M&T will cause Partners Trust Bank, a wholly owned direct subsidiary bank of Partners Trust, to merge with and into M&T Bank, a wholly owned direct subsidiary bank of M&T, with M&T Bank being the surviving bank and continuing its existence under the laws of the State of

New York. We refer to this merger between the two banks as the “bank merger.” We sometimes refer to the merger, the holdco merger and the bank merger collectively as the “transaction.”

 

Merger Consideration

 

In connection with the merger, Partners Trust stockholders will have the right, with respect to each of their shares of Partners Trust common stock, to elect to receive merger consideration consisting of either $12.50 in cash or a fraction of a share of M&T common stock equal to $12.50 divided by the average closing price of M&T common stock for the five trading days immediately prior to the completion of the merger, subject to proration and adjustment as described below. The aggregate merger consideration will be paid 50% in cash and 50% in shares of M&T common stock. The actual number of shares of M&T common stock that each share of Partners Trust common stock is entitled to receive will be determined based on the average of the closing prices of M&T common stock for the five trading days ending on the day immediately prior to the completion date of the merger.

 

If you are a Partners Trust stockholder, the value of the consideration that you will receive as of the completion date with respect to each share of Partners Trust common stock will be $12.50 either in cash or in a fraction of a share of M&T common stock equal to $12.50 divided by the average of the closing prices of M&T common stock for the five trading days ending on the day immediately prior to the closing date of the merger.

 

A chart showing the cash and stock merger consideration at various hypothetical five day average closing prices of M&T common stock is provided on page 3 of this proxy statement/prospectus.

 

At the time of mailing of this proxy statement/prospectus to the holders of record of Partners Trust common stock, the exchange agent will mail or deliver to each holder of record of Partners Trust common stock an election form and appropriate transmittal materials containing instructions for use in effecting the surrender of Partners Trust stock certificates in exchange for the merger consideration. Elections must be received by the exchange agent by the election deadline specified in the form of election. Partners Trust stockholders may specify different elections with respect to different shares held by them (for example, a stockholder with 100 shares could make a cash election with respect to 50 shares and a stock election with respect to the other 50 shares) and may designate specific shares for exchange into either stock or cash.

 

Cash Election

 

The merger agreement provides that each Partners Trust stockholder who makes a valid cash election will have the right to receive, in exchange for each share of Partners Trust common stock, an amount in cash equal to $12.50, subject to proration and adjustment as described below. We sometimes refer to this cash amount as the “cash consideration.”

 

Stock Election

 

The merger agreement provides that each Partners Trust stockholder who makes a valid stock election will have the right to receive, in exchange for each share of Partners Trust common stock, a fraction of a share of M&T common stock equal to $12.50 divided by the M&T Share Price, rounded to the nearest thousandth and subject to proration and adjustment as described below. We sometimes refer to such fraction of a share of M&T common stock as the “stock consideration.” Based on the average closing price of M&T common stock for the five trading days ending October 17, 2007, the stock consideration would be approximately 0.1240 share of M&T common stock.

 

The “M&T Share Price” is the average, rounded to the nearest thousandth, of the closing prices of M&T common stock on the NYSE for the five trading days immediately preceding the closing date of the merger.

 

No fractional shares of M&T common stock will be issued to any holder of Partners Trust common stock upon completion of the merger. For each fractional share that would otherwise be issued, M&T will pay cash in an amount equal to the fraction of a whole share that would otherwise have been issued, multiplied by the closing sale price of M&T common stock on the NYSE for the last NYSE trading day immediately preceding the date the merger is completed. No interest will be paid or accrued on cash payable to holders in lieu of fractional shares.

 

Non-Election

 

Partners Trust stockholders who make no election to receive cash or shares of M&T common stock in the merger, whose elections are not received by the exchange agent by the election deadline, or whose forms of election are improperly completed and/or are not signed will be deemed not to have made an election. Stockholders not making an election may be paid in cash, M&T common stock or a mix of cash and shares of M&T common stock depending on, and after giving effect to, using the adjustment described below, the number of valid cash elections

and stock elections that have been made by other Partners Trust stockholders, and the number of shares held by Partners Trust stockholders who have perfected and not lost their right to dissenters’ rights of appraisal in accordance with the procedures and requirements of Section 262 of the DGCL. We sometimes refer to the shares held by such dissenting Partners Trust stockholders as “Dissenting Shares.” See “The Merger Agreement — Dissenters’ Rights of Appraisal of Partners Trust Stockholders” beginning on Page 51 of this proxy statement/prospectus.

 

Adjustment

 

The total number of shares of M&T common stock that will be issued in the merger would be approximately 2,702,095 and the cash that would be paid would be approximately $272.39 million, based on the number of Partners Trust shares outstanding on October 16, 2007. If the number of shares of Partners Trust common stock outstanding increases prior to the date of completion of the merger due to the exercise of outstanding options to purchase or receive shares of Partners Trust common stock, the aggregate number of shares of M&T common stock to be issued in the merger and the aggregate amount of cash to be paid will be increased accordingly.

 

The cash and stock elections are subject to proration and adjustment to preserve the proportion of the aggregate number of shares of M&T common stock to be issued to the aggregate cash consideration to be paid in the merger. As a result, even if you make an all cash election or an all stock election, you may nevertheless receive a mix of cash and stock consideration.

 

Adjustment if Stock Election is Oversubscribed

 

Cash may be paid to stockholders who make stock elections if the stock election is oversubscribed. The shares of Partners Trust common stock for which valid stock elections are made are known as the “stock election shares”. The number of shares of Partners Trust common stock that will be converted into shares of M&T common stock in the merger is equal to the “stock conversion number”, which is equal to the product of (a) the number of shares to be exchanged in the merger and (b) 50%, rounded to the nearest whole number.

 

If the stock election shares are greater than the stock conversion number, the stock election is oversubscribed, in which case:

 

 

Example A. Oversubscription of Stock Election

 

Assuming that:

 

 

 

 

 

then the stock conversion number is approximately 21,791,089 and a Partners Trust stockholder making a stock election with respect to 1,000 shares would receive the stock consideration with respect to 750 shares and the cash consideration with respect to 250 shares. Therefore, that Partners Trust stockholder would receive 93 shares of M&T common stock and $3,125.00.

Adjustment if Cash Election is Oversubscribed