Filing Details

 

	UNITED STATES
	SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C. 20549

 

 

SCHEDULE 13D

 

Under the Securities Exchange Act of 1934
(Amendment No.     )*

 

 

(Name of Issuer)

 

(Title of Class of Securities)

 

(CUSIP Number)

 

Castle Creek Capital Partners VII, LP

6051 El Tordo

PO Box 1329

Rancho Santa Fe, CA 92067

858-756-8300

 

Copy to:

 

John M. Eggemeyer

c/o Castle Creek Capital

6051 El Tordo

P.O. Box 1329

Rancho Santa Fe, CA 92067

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

 

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

 

* The remainder of this cover page shall be filled out for a reporting persons initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.  The information required on the remainder of this cover page shall not be deemed to be filed for the purpose of Section 18 of the Securities Exchange Act of 1934 (the Act) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

 

 

 

(1)           The information set forth in Items 4, 5 and 6 of this statement on Schedule 13D is incorporated herein by reference.

 

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(1)           The information set forth in Items 4, 5 and 6 of this statement on Schedule 13D is incorporated herein by reference.

 

3

 

 

(1)           The information set forth in Items 4, 5 and 6 of this statement on Schedule 13D is incorporated herein by reference.

 

4

 

 

(1)           The information set forth in Items 4, 5 and 6 of this statement on Schedule 13D is incorporated herein by reference.

 

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Item 1.                   Security and Issuer

 

The title and class of equity security to which this statement on Schedule 13D relates is the common stock, par value $0.01 per share, of Pathfinder Bancorp, Inc. (the Company).  The address of the principal executive office of the Company is 214 West First Street, Oswego, NY 13126.

 

Item 2.                   Identity and Background

 

This statement on Schedule 13D is being jointly filed by the parties identified below. All of the filers of this Schedule 13D are collectively referred to as the Reporting Persons. The Joint Filing Agreement among the Reporting Persons is attached hereto as Exhibit 99.1 and incorporated herein by reference.

 

(a)-(c)     The following are the Reporting Persons: (i) Castle Creek Capital Partners VII, LP, a Delaware limited partnership (Fund VII) and a private equity fund focused on investing in community banks throughout the United States of America; (ii) Castle Creek Capital VII LLC, a Delaware limited liability company (CCC VII), whose principal business is to serve as the sole general partner of, and manage, Fund VII; (iii) John M. Eggemeyer, a United States citizen and managing principal of CCC VII; and (iv) John T. Pietrzak, a United States citizen and managing principal of CCC VII.  The business address for each of the Reporting Persons is 6051 El Tordo, P.O. Box 1329, Rancho Santa Fe, CA 92067.

 

(d)           During the last five years, none of the Reporting Persons has been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors).

 

(e)           During the last five years, none of the Reporting Persons has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

 

(f)            N/A.

 

Item 3.                   Source and Amount of Funds or Other Consideration

 

The information in Items 4 and 6 is incorporated by reference.

 

On May 8, 2019, pursuant to a securities purchase agreement (the Pathfinder SPA), Fund VII purchased (i) 37,700 shares of the Companys common stock, par value $0.01 per share (Common Stock), at a purchase price of $14.25 per share, (ii) 1,155,283 shares of the Companys Series B convertible perpetual preferred stock (Series B Preferred Stock, and such shares of Common Stock and Series B Preferred Stock issued pursuant to the Pathfinder SPA, the Pathfinder SPA Shares), at a purchase price of $14.25 per share, and (iii) a warrant to purchase 125,000 shares of Common Stock at an exercise price of $14.25 per share (the Warrant).  The aggregate purchase price of the Pathfinder SPA Shares and the Warrant was $17,000,007.75.

 

On May 8, 2019, Fund VII also entered into a securities purchase agreement (the Maltese SPA) with certain affiliates of Maltese Capital Management (the Maltese Funds), pursuant to which Fund VII acquired 427,010 shares of Common Stock held by the Maltese Funds for a purchase price of $14.25 per share (the Maltese SPA Shares, and together with the Pathfinder SPA Shares, the Shares).  Following the closing of the transactions contemplated by the Pathfinder SPA and the Maltese SPA, Fund VII owns 464,710 shares of Common Stock.

 

The foregoing references to and descriptions of the Pathfinder SPA and the Maltese SPA, and the transactions contemplated thereby, do not purport to be complete and are subject to, and qualified in their entirety by reference to, the full text of the Pathfinder SPA and the Maltese SPA, which are attached hereto as Exhibits 99.2 and 99.7, respectively, and incorporated herein by reference.

 

Item 4.                   Purpose of Transaction

 

The information in Items 3 and 6 is incorporated by reference.

 

Fund VII acquired the Shares and the Warrant in the ordinary course of business because of its belief that the Shares and the Warrant represented an attractive investment in accordance with its investment strategy.  Subject to the limitations imposed by the Pathfinder SPA and the applicable federal and state securities laws, Fund VII may dispose of the Shares and/or the Warrant from time to time, subject to market conditions and other investment considerations, and may cause the Shares and/or the Warrant to be distributed in kind to investors.  To the extent permitted by the Pathfinder SPA and applicable bank regulatory limitations, Fund VII may directly or indirectly

 

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acquire additional shares of Common Stock or associated rights or securities exercisable for or convertible into Common Stock, depending upon an ongoing evaluation of its investment in the Common Stock and securities exercisable for or convertible into Common Stock, applicable legal restrictions, prevailing market conditions, liquidity requirements of such Reporting Person and/or investment considerations.

 

To the extent permitted under the Pathfinder SPA, and applicable laws, the Reporting Persons may engage in discussions with management, the Companys board of directors (the Board), other stockholders of the Company and other relevant parties concerning the business, operations, composition of the Board, management, strategy and future plans of the Company.

 

As further described in Item 6 below, pursuant to the Pathfinder SPA Fund VII has the right to appoint a representative to the Board.  Subject to ongoing discussions with the Company and selection of the individual to serve as its representative, Fund VII expects to exercise such right as promptly as practicable.

 

The foregoing references to and descriptions of the Pathfinder SPA do not purport to be complete and are subject to, and are qualified in their entirety by reference to, the full text of the Pathfinder SPA, which is attached hereto as Exhibit 99.2 and incorporated herein by reference.

 

Other than as described in this Item 4, each of the Reporting Persons has no present plans or proposals that relate to or would result in any of the events set forth in Items 4(a) through (j) of Schedule 13D. However, each of the Reporting Persons reserves the right to change its plans at any time, as it deems appropriate, in light of its ongoing evaluation of (i) its business and liquidity objectives; (ii) the Companys financial condition, business, operations, competitive position, prospects and/or share price; (iii) industry, economic and/or securities markets conditions; (iv) alternative investment opportunities; and (v) other relevant factors.

 

Item 5.                   Interest in Securities of the Issuer

 

The information contained on the cover pages to this Schedule 13D and the information set forth or incorporated in Items 2, 3, 4 and 6 is incorporated herein by reference.

 

(a) and (b)

 

Reporting Person		Amount Beneficially Owned (2)		Percent of Class (3)		Sole Power to Vote or Direct the Vote		Shared Power to Vote or Direct the Vote		Sole Power to Dispose or to Direct the Disposition		Shared Power to Dispose or Direct the Disposition
Castle Creek Capital Partners VII, LP		464,710		9.9	%	0		464,710		0		464,710
Castle Creek Capital VII LLC (1)		464,710		9.9	%	0		464,710		0		464,710
John M. Eggemeyer (1)		464,710		9.9	%	0		464,710		0		464,710
John T. Pietrzak (1)		464,710		9.9	%	0		464,710		0		464,710

 

(1)           Each of CCC VII, Mr. Eggemeyer and Mr. Pietrzak disclaims beneficial ownership of the Common Stock owned by Fund VII, except to the extent of its or his pecuniary interest therein.

 

(2)           Excludes 1,155,283 shares of Series B Preferred Stock and the Warrant to purchase 125,000 shares of Common Stock.  Since Fund VII does not presently, and will not within the next 60 days, have the right to acquire Common Stock in respect of such Series B Preferred Stock and the Warrant (due in part to the limitations described in Item 6 below), those underlying shares are not included in the amount reported herein.

 

(3)           This calculation is based on 4,694,221 shares of Common Stock of the Company outstanding as of May 8, 2019, as represented by the Company in the Pathfinder SPA.

 

(c)

 

Except as set forth herein, none of the Reporting Persons had any transactions in the Common Stock (or securities convertible into the Common Stock) during the past 60 days.

 

(d)

 

Other than as described herein, no other persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of Common Stock reported in the Schedule 13D.

 

(e)

 

N/A

 

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Item 6.                   Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer

 

The information set forth in Items 3 and 4 is incorporated herein by reference.

 

The Series B Preferred Stock will rank, as to payments of dividends and distribution of assets upon dissolution, liquidation or winding up of the Company, pari passu with the Common Stock pro rata. Holders of Series B Preferred Stock will have no voting rights except as may be required by law. The Series B Preferred Stock will not be redeemable by either the Company or by the holder.

 

Each share of Series B Preferred Stock will be convertible on a one for one basis into either (i) Common Stock under certain circumstances (subject to the restrictions on owning in excess of 9.9% of the outstanding Common Stock, as further described below) or (ii) non-voting common stock, par value $0.01 per share (which will also be convertible into Common Stock), subject to approval of the creation of such class of non-voting common stock by the Companys stockholders (the Non-Voting Common Stock).  Each share of Series B Preferred Stock will automatically convert into one share of Non-Voting Common Stock effective as of the close of business on the date that the Company obtains stockholder approval for and files an amendment to the Companys articles of incorporation to authorize the Non-Voting Common Stock. The Company must request stockholder approval of the amendment to the Articles of Incorporation to authorize the class of Non-Voting Common Stock no later than at the 2021 annual meeting of Company stockholders.  Fund VIIs right to convert the Series B Preferred Stock and the Non-Voting Common Stock into Common Stock, and its ability to exercise the Warrant, is subject to NASDAQ limitations on the Companys ability to issue in excess of 19.99% of the Common Stock outstanding immediately prior to the execution of the Pathfinder SPA (the Exchange Cap).  The Company must also request stockholder approval to eliminate the Exchange Cap no later than at the 2021 annual meeting of Company stockholders.

 

Upon the issuance of the Non-Voting Common Stock, subject to certain exceptions, Fund VII would be permitted to convert, or upon the request of the Company required to convert, the shares of Non-Voting Common Stock into an equal number of shares of Common Stock, so long as upon conversion Fund VII did not own more than 9.9% of the Common Stock. Additionally, the shares of Non-Voting Common Stock will automatically convert into an equal number of shares of Common Stock upon a transfer of the shares to a non-affiliate of Fund VII in a permissible transfer.

 

The Articles Supplementary to the Articles of Incorporation of the Company designating the Series B Preferred Stock (the Articles Supplementary) are attached hereto as Exhibit 99.3 and incorporated herein by reference.

 

The following is a description of certain terms of the Pathfinder SPA and related transaction documents:

 

Representations and Warranties.  Pursuant to the Pathfinder SPA, the Company made customary representations and warranties to Fund VII relating to, among other things, the Company, its business, the issuance of the Pathfinder SPA Shares and authorization to enter into the transaction.  Fund VII also made customary representations and warranties to the Company regarding, among other things, Fund VIIs valid organization and authorization to enter into the transaction. The Companys and Fund VIIs representations and warranties generally expire 12 months following the Closing Date (as defined in the Pathfinder SPA), with the exception of certain fundamental representations of the Company, which survive for six years from the Closing Date, and certain representations of the Company that survive for 60 days after the expiration of the applicable statute of limitations.

 

Transfer Restrictions.  Fund VII agreed not to sell or dispose of the Pathfinder SPA Shares unless doing so was in compliance with the registration requirements or exemptions of the Securities Act of 1933 (as amended, the Securities Act) and applicable state, federal or foreign securities laws.

 

Ownership Limitation and Avoidance of Control.  Fund VII agreed that neither it nor its affiliates (for purposes of any banking regulation or law) shall be entitled to purchase shares of Common Stock that would result in Fund VII and its affiliates collectively to be deemed to own, control or have the power to vote more than 9.9% of the Companys issued and outstanding Common Stock.  Neither the Company nor any of its subsidiaries is permitted under the Pathfinder SPA to take any action (including any redemption, repurchase, rescission or recapitalization of Common Stock or securities or rights to purchase or that may become convertible into Common Stock, in each case, where Fund VII is not given the right to participate in such transaction to the extent of Fund VIIs pro rata portion), that would cause (i) the equity in the Company owned by Fund VII and its affiliates (as such term is used under the Bank Holding Company Act (the BHCA)) to exceed 33.3% of the Companys total equity (provided that there is no ownership or control in excess of 9.9% of any class of voting securities of the Company by Fund VII together with its affiliates) or (ii) Fund VIIs and its affiliates ownership of any class of voting securities of the Company to exceed 9.9% of such class, in each case without the prior written consent of Fund VII.  Finally, the Company may not take any action that would cause Fund VIIs ownership to increase to an amount that would constitute control under the BHCA, the Change in Bank Control Act, or any rules or regulations promulgated thereunder.  Additionally, Fund VII shall not have the ability to purchase more than 33.3% of the Companys total equity or exercise any voting rights in excess of 9.9% of the total outstanding voting securities of the Company.  In the event that Fund VII breaches any of these obligations, or believes that it is reasonably likely to breach such

 

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obligations, Fund VII agreed to promptly notify the Company and to cooperate in good faith with the Company to modify ownership or make other arrangements or take any other action necessary to cure or avoid such breach.

 

Indemnification.  The Company agreed to indemnify Fund VII, its controlling persons and each of their directors, officers, stockholders, members, partners, employees, agents, investment advisors and those with similar roles (each a  Fund VII Party) for losses and liabilities suffered or incurred as a result of (i) the Companys breach of any of its representations, warranties, covenants or agreements in the Pathfinder SPA or any other transaction documents or (ii) any action instituted against a Fund VII Party in any capacity by any shareholder of the Company or other third party who is not an affiliate of such Fund VII Party.  The Companys indemnification obligations are subject to the limitations set forth in the Pathfinder SPA (including the expiration of certain of the representations and warranties, as described above).

 

Board Representative and Observer.  Pursuant to the terms of the Pathfinder SPA, Fund VII will be entitled to have one representative appointed to the Board for so long as Fund VII, together with its respective affiliates, owns, in the aggregate, 4.9% or more of all of the outstanding shares of the Common Stock.  If Fund VII, together with its respective affiliates, owns, in the aggregate, 4.9% or more of all of the outstanding shares of the Common Stock and does not have a board representative on the Board, the Company will invite a person designated by Fund VII to attend meetings of the Board as an observer.

 

Preemptive Rights.  For so long as Fund VII, together with its respective affiliates, owns, in the aggregate, 4.9% or more of all of the outstanding shares of the Common Stock, if the Company makes any public or nonpublic offering or sale of any equity (including Common Stock, Series B Preferred Stock or Non-Voting Common Stock), or any securities, options or debt that is convertible or exchangeable into equity or that includes an equity component, then, subject to certain exceptions, Fund VII will be afforded the opportunity to acquire from the Company for the same price (net of any underwriting discounts or sales commissions) and on the same terms as such securities are proposed to be offered to others, up to the amount of new securities in the aggregate required to enable it to maintain its proportionate Common Stock equivalent interest in the Company immediately prior to any such issuance of new securities.

 

Registration Rights.  In connection with the Pathfinder SPA, the Company and Fund VII entered into a registration rights agreement, dated as of May 8, 2019 (the Registration Rights Agreement).  Pursuant to the terms of the Registration Rights Agreement, the Company agreed to file a resale registration statement by no later than May 8, 2023 to register the resale of the Securities.

 

Pursuant to the Registration Rights Agreement, if the Company intends to file a registration statement covering a primary or secondary offering of any of its Common Stock, Series B Preferred Stock, Non-Voting Common Stock, Warrant or other securities, which is not a registration solely to implement an employee benefit plan pursuant to a registration statement on Form S-8 or a registration statement on Form S-4, the Company will promptly give written notice to the holders of the Securities of its intention to effect such a registration and the Company will effect the registration under the Securities Act of all registrable securities that the holders request be included in such registration.  The Registration Rights Agreement is attached hereto as Exhibit 99.4 and incorporated herein by reference.

 

Warrant. The Company and Fund VII entered into a Warrant Agreement, dated as of May 8, 2019 (the Warrant Agreement), to, among other things, authorize and establish the terms of the Warrant, subject to certain adjustments described below. The Warrant is exercisable at any time after May 8, 2019, and from time to time, in whole or in part, until May 8, 2026. However, the exercise of such Warrant remains subject to the Exchange Cap and regulatory approval if Fund VIIs ownership of Common Stock would exceed 9.9%.

 

The exercise price (currently $14.25 per share of Common Stock) and the number of shares of Common Stock for which the Warrant is exercisable are subject to adjustment from time to time upon the occurrence of certain events including: (1) the Company declaring a dividend or making a distribution on its Common Stock in shares of Common Stock, (2) splitting, subdividing or reclassifying the outstanding shares of Common Stock into a greater number of shares, (3) if the Company issues or sells, or agrees to issue or sell, any Common Stock, Series B Preferred Stock, Non-Voting Common Stock or other securities that are convertible into or exchangeable or exercisable for Common Stock, Series B Preferred Stock or Non-Voting Common Stock (or are otherwise linked to Common Stock) for consideration per share less than the market price, or (4) a distribution to all holders of Common Stock of cash, any shares of any class other than the Companys Common Stock, evidences of indebtedness of the Company, rights or warrants of the Company. Notwithstanding the foregoing, upon Fund VIIs election, Fund VII will receive the same cash dividends on the Warrant as common stockholders instead of an adjustment to the exercise price and the number of shares of Common Stock for which the Warrant is exercisable.  The Warrant Agreement is attached hereto as Exhibit 99.5 and incorporated herein by reference.

 

ERISA Matters.  Fund VII was provided customary VCOC rights pursuant to a VCOC Letter Agreement, dated as of May 8, 2019, by and between Fund VII and the Company (the VCOC Letter Agreement), including the right to receive regular financial reports (including, but not limited to, annual and quarterly financial reports), the right to inspect the books and records of the Company and the right to consult with management of the Company on matters relating to the business and affairs of the Company; provided, however, that this provision does not entitle Fund VII to consult with management of the Company on matters relating to the business and affairs of the Company more than once per calendar quarter.  The Company also agreed to consider, in good faith, the recommendations of Fund VII or its designated representative in connection with the matters on which it is consulted as described above, recognizing that the ultimate discretion with respect to all such matters shall be retained by the Company.  The VCOC Letter Agreement is attached hereto as Exhibit 99.6 and incorporated herein by reference.

 

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The following is a description of certain terms of the Maltese SPA:

 

Pursuant to the Maltese SPA, each of the Maltese Funds made customary representations and warranties to Fund VII relating to the Maltese Funds, their ownership of the Maltese SPA Shares and their authorization to enter into the transaction.  Fund VII also made customary representations and warranties to the Maltese Funds regarding, among other things, Fund VIIs valid organization and authorization to enter into the transaction. The Companys and Fund VIIs representations and warranties, as well as the covenants made by each party, survive the closing of the transactions contemplated by the Maltese SPA.

 

The foregoing references to and descriptions of the Pathfinder SPA, the Articles Supplementary, the Registration Rights Agreement, the Warrant Agreement, the VCOC Letter Agreement and the Maltese SPA, and the transactions contemplated thereby, do not purport to be complete and are subject to, and are qualified in their entirety by reference to, the full text of the Pathfinder SPA, the Articles Supplementary, the Registration Rights Agreement, the Warrant Agreement, the VCOC Letter Agreement and the Maltese SPA, which are attached hereto as Exhibits 99.2, 99.3, 99.4, 99.5, 99.6 and 99.7 respectively, and incorporated herein by reference.

 

Item 7.                   Material to be Filed as Exhibits

 

Exhibit		Description
Exhibit 99.1		Joint Filing Agreement, dated as of May 15, 2019, by and among Castle Creek Capital Partners VII, LP and Castle Creek Capital VII LLC, John M. Eggemeyer and John T. Pietrzak.
Exhibit 99.2		Securities Purchase Agreement, dated as of May 8, 2019, by and between Pathfinder Bancorp, Inc. and Castle Creek Capital Partners VII, LP (incorporated by reference to Exhibit 10.1 to Pathfinder Bancorp, Inc.s Current Report on Form 8-K filed on May 9, 2019).
Exhibit 99.3		Articles Supplementary to the Articles of Incorporation of Pathfinder Bancorp, Inc. designating the Companys Series B Convertible Perpetual Preferred Stock, par value $0.01 per share (incorporated by reference to Exhibit 3.1 to Pathfinder Bancorp, Inc.s Current Report on Form 8-K filed on May 9, 2019).
Exhibit 99.4		Registration Rights Agreement, dated as of May 8, 2019, by and between Pathfinder Bancorp, Inc. and Castle Creek Capital Partners VII, LP (incorporated by reference to Exhibit 10.2 to Pathfinder Bancorp, Inc.s Current Report on Form 8-K filed on May 9, 2019).
Exhibit 99.5		Warrant Agreement, dated as of May 8, 2019, by and between Pathfinder Bancorp, Inc. and Castle Creek Capital Partners VII, LP (incorporated by reference to Exhibit 4.1 to Pathfinder Bancorp, Inc.s Current Report on Form 8-K filed on May 9, 2019).
Exhibit 99.6		VCOC Letter Agreement, dated as of May 8, 2019, by and between Pathfinder Bancorp, Inc. and Castle Creek Capital Partners VII, LP.
Exhibit 99.7		Securities Purchase Agreement, dated as of May 8, 2019, by and between Castle Creek Capital Partners VII, LP, Malta Hedge Fund II, L.P., Malta Hedge Fund, L.P., Malta Market Neutral Master Fund, Ltd., Malta Offshore, Ltd. and Malta Thrift Fund, L.P.

 

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SIGNATURES

 

After reasonable inquiry and to the best of the knowledge and belief of the undersigned, the undersigned certifies that the information set forth in this statement is true, complete and correct.

 

Dated: May 15, 2019

 

		CASTLE CREEK CAPITAL PARTNERS VII, LP
		By:	/s/ John M. Eggemeyer
		Name:	John M. Eggemeyer
		Title:	Managing Principal
		CASTLE CREEK CAPITAL VII LLC
		By:	/s/ John M. Eggemeyer
		Name:	John M. Eggemeyer
		Title:	Managing Principal
		JOHN M. EGGEMEYER
		By:	/s/ John M. Eggemeyer
		JOHN T. PIETRZAK
		By:	/s/ John T. Pietrzak

 

SIGNATURE PAGE TO SCHEDULE 13D (PATHFINDER BANCORP, INC.)

 

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