UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)*
INCARA PHARMACEUTICALS CORPORATION
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(Name of Issuer)
Common Stock, par value $0.001 per share
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(Title of Class of Securities)
45325S-10-1
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(CUSIP Number)
with a copy to:
Mitchell D. Kaye, Manager Steven E. Siesser, Esq.
Xmark Asset Management, LLC Lowenstein Sandler PC
152 West 57th Street, 21st Floor 65 Livingston Avenue
New York, New York 10019 Roseland, New Jersey 07068
(212) 247-8200 (973) 597-2500
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
January 22, 2004
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule l3G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box. [ ]
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7 for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
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 ("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).
Cusip No. 45325S-10-1
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1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons
(entities only):
Xmark Asset Management, LLC
13-3954392
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2. Check the Appropriate Box if a Member of a Group (See Instructions):
(a) Not
(b) Applicable
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3. SEC Use Only
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4. Source of Funds (See Instructions): WC
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5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d)
or 2(e): Not Applicable
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6. Citizenship or Place of Organization: New York, United States
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Number of 7. Sole Voting Power: *
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Shares Beneficially 8. Shared Voting Power: *
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Owned by
Each Reporting 9. Sole Dispositive Power: *
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Person With 10. Shared Dispositive Power: *
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11. Aggregate Amount Beneficially Owned by Each Reporting Person: 50,190,102*
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12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions): Not Applicable
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13. Percent of Class Represented by Amount in Row (11): 74.99%*
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14. Type of Reporting Person (See Instructions): IA
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* The reporting person is Xmark Asset Management, LLC ("XAM"), a New York
limited liability company formerly known as Brown Simpson Asset Management, LLC,
which is the sole manager of Goodnow Capital, L.L.C., a Delaware limited
liability company ("Goodnow"). Goodnow is the holder of 50,190,102 shares of
common stock, par value $0.001 per share (the "Common Stock"), of Incara
Pharmaceuticals Corporation, a Delaware corporation (the "Company"). Pursuant to
the Operating Agreement of Goodnow, management and control of Goodnow is vested
exclusively in the sole manager and, as a result, XAM possesses the sole power
to vote and direct the disposition of all securities of the Company owned by
Goodnow. Thus, as of January 22, 2004, for the purposes of Reg. Section
240.13d-3, XAM may be deemed to beneficially own 50,190,102 shares of Common
Stock, or 74.99% of the shares deemed issued and outstanding as of that date.
Item 1. Security and Issuer.
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The issuer, whose common stock, par value $0.001 per share (the
"Common Stock") this statement relates to, changed its name effective December
19, 2003 from Incara, Inc. to Incara Pharmaceuticals Corporation (the
"Company").
Item 2. Identity and Background.
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Brown Simpson Asset Management, LLC, the person filing this statement,
changed its name effective December 4, 2003, to Xmark Asset Management, LLC
("XAM"). XAM remains the sole manager of Goodnow Capital, L.L.C., a Delaware
limited liability company ("Goodnow"), the registered holder of the securities
reported herein.
Item 3. Source and Amount of Funds or Other Consideration.
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The funds used by Goodnow in its acquisition and funding of the
Debenture (defined in Item 5 below) were drawn from working capital.
Item 4. Purpose of Transaction.
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Notwithstanding the increase of its ownership in the Company reported
herein and its ability through its majority ownership of the outstanding Common
Stock, Goodnow continues to have no present intention to direct the day-to-day
management and affairs of the Company.
Item 5. Interest in Securities of the Issuer.
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Based upon information derived from the Company's Form S-1 filed on
December 19, 2003, as of November 30, 2003, there were 47,340,602 shares of
Common Stock issued and outstanding.
On September 16, 2003, Goodnow and the Company entered into a
Debenture and Warrant Purchase Agreement (the "Purchase Agreement") pursuant to
which, among other things, Goodnow agreed to provide an aggregate of $5,000,000
of financing to the Company through the purchase of a Secured Convertible
Debenture in the principal amount of $5,000,000 (the "Debenture") on the terms
and subject to the conditions set forth in the Purchase Agreement, including
without limitation the various conditions to Goodnow's obligation to purchase
the Debenture. On January 14, 2004, Goodnow consummated its purchase of the
Debenture (a copy of which is attached hereto as Exhibit 1) from the Company and
made its first advance to the Company under the Debenture in the amount of
$1,000,000. The Debenture accrues interest at the rate of 10% per annum, which
rate is subject to increase upon the occurrence of an Event of Default (as
defined in the Debenture). In order to induce Goodnow to waive certain of its
conditions to closing the purchase of the Debenture under the Purchase
Agreement, the Company issued to Goodnow, simultaneously with Goodnow's purchase
of the Debenture, a warrant (the "Warrant") to purchase 12,500,000 shares of
Common Stock at an exercise price of $0.40 per share (a copy of which is
attached hereto as Exhibit 2). The principal and interest due and owing under
the Debenture are convertible into shares of Common Stock at a per share
conversion price of $0.10, which, if fully funded, would be 50,000,000 shares
(plus a number of shares representing accrued interest). Each of the conversion
price for the Debenture and the exercise price for the Warrant are subject to
certain anti-dilution adjustments in accordance with the terms of the Debenture
and the Warrant, respectively.
Subject to the Further Limitation (defined below in this Item 5), the
Debenture permits Goodnow to convert the maximum principal amount thereof (i.e.
$5,000,000) into shares of Common Stock at the then-existing per share
conversion price at any time prior to repayment of the Debenture in accordance
with its terms (but in no event after the eighteen month anniversary of the
maturity date of the Debenture); provided that, prior to any such conversion,
Goodnow advances the principal amount of the Debenture not previously advanced
to the Company. Thus, each of the Debenture and Warrant is presently convertible
and exercisable.
The maturity date of the Debenture on which all sums outstanding
thereunder are due and payable in full is December 24, 2004. If the Debenture is
repaid in full on its maturity date, then it may not be converted thereafter
into Common Stock. If the Company does not repay the Debenture in full on
December 24, 2004, Goodnow may, so long as the Debenture is outstanding, convert
the then outstanding principal and interest due under the Debenture (and, if the
maximum principal amount of the Debenture has not been advanced by Goodnow, at
Goodnow's option, the principal balance of the Debenture which has not been
advanced by Goodnow) into shares of Common Stock up until the eighteen month
anniversary of the maturity date. The Debenture may not be prepaid without
Goodnow's prior written consent
The expiration date of the Warrant is 5:00 P.M., Eastern Time, on
January 9, 2006, unless the Company shall have consummated and received the cash
proceeds from a Qualified Financing (as defined in the Warrant) on or prior to
April 30, 2004, in which case the expiration date of the Warrant shall be the
date of consummation of the Qualified Financing.
Each of the Debenture and the Warrant provides that in no event shall
the Debenture or the Warrant be convertible or exercisable, as the case may be,
to the extent that the issuance of shares of Common Stock upon conversion or
exercise thereof, after taking into account the shares of Common Stock then
owned by Goodnow and its affiliates (which, as of the date hereof, is 30,601,644
shares of Common Stock), would result in the beneficial ownership by Goodnow and
its affiliates of more than 9.99% of the outstanding Common Stock (the "Issuance
Limitation"). Goodnow has the express right to waive the Issuance Limitation
upon sixty-one (61) days written notice to the Company. On January 21, 2004,
pursuant to a letter (a copy of which is attached hereto as Exhibit 3), Goodnow
waived the conversion limitation specified in Section 6(c)(i) of the Debenture
and the exercise limitation specified in Section 1(d)(i) of the Warrant.
Each of the Debenture and the Warrant contains a second further
limitation on their respective conversion and exercise, which provides that in
no event shall either the Debenture or the Warrants be converted or exercised,
as the case may be, to the extent that the issuance of shares of Common Stock
upon conversion or exercise thereof, after taking into account the shares of
Common Stock then owned by Goodnow and its affiliates, would result in the
beneficial ownership by Goodnow and its affiliates of more than 74.99% of the
outstanding Common Stock (the "Further Limitation"). The Further Limitation
presently remains in effect. Accordingly, the Debenture and the Warrant may be
converted and exercised, as the case may be, for an aggregate of 19,588,458
shares due to the limitation imposed by the Further Limitation.
XAM possesses sole power to vote and direct the disposition of all
securities of the Company owned by Goodnow. In addition to the Debenture and the
Warrant, Goodnow owns 30,601,644 shares of Common Stock. Thus, as of January 22,
2004, for the purposes of Reg. Section 240.13d-3, XAM, the sole manager of
Goodnow, may be deemed to beneficially own 50,190,102 shares of Common Stock, or
74.99% of the Common Stock deemed issued and outstanding as of that date. XAM's
interest in the securities reported herein is limited to its pecuniary interest
in Goodnow, if any.
Since the most recent filing of Schedule 13D, XAM did not engage in
any transactions in Common Stock or securities convertible into, exercisable for
or exchangeable for Common Stock, by XAM or any person or entity for which XAM
possesses voting or investment control over the securities thereof, other than
as specified above.
The description of the transactions and agreements contained herein is
qualified in its entirety by this reference to the agreements attached as
Exhibits in Item 7 below, which agreements are incorporated herein by this
reference thereto.
Item 7. Material to be Filed as Exhibits.
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1. Secured Convertible Debenture, dated as of January 14, 2004, made
by Incara Pharmaceuticals Corporation payable to the order of Goodnow Capital,
L.L.C., in the principal amount of $5,000,000 filed as Exhibit 10.102 to the
Form 8-K filed by Incara Pharmaceuticals Corporation on January 15, 2004.
2. Warrant to purchase 12,500,000 shares of Common Stock, par value
$0.001 per share, issued by Incara Pharmaceuticals Corporation to Goodnow
Capital, L.L.C. filed as Exhibit 4.9 to the Form 8-K filed by Incara
Pharmaceuticals Corporation on January 15, 2004.
3. Letter dated January 21, 2004 from Goodnow Capital, L.L.C., to
Incara Pharmaceuticals Corporation, waiving the conversion limitation specified
in Section 6(c)(i) of the Debenture and the exercise limitation specified in
Section 1(d)(i) of the Warrant.
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
January 26, 2004
XMARK ASSET MANAGEMENT, LLC
/s/ Mitchell D. Kaye
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Mitchell D. Kaye, Manager
Attention: Intentional misstatements or omissions of fact constitute Federal
criminal violations (See 18 U.S.C. 1001).
EXHIBIT 3
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January 21, 2004
VIA FACSIMILE (919) 544-1245
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Incara Pharmaceuticals Corporation
P.O. Box 14287
79 T.W. Alexander Drive
4401 Research Commons, Suite 200
Research Triangle Park, NC 27709
Attn: Clayton I. Duncan
Re: Holder's Notice of Waiver Under Secured Convertible Debenture and
Holder's Notice of Waiver Under Warrant
Reference is made to: (i) the Secured Convertible Debenture (the "Debenture") in
the principal amount of $5,000,000, dated as of January 9, 2004, issued by
Incara Pharmaceuticals Corporation (the "Company") in favor of Goodnow Capital,
L.L.C. ("Goodnow"); and (ii) the warrant (the "Warrant") to purchase 12,500,000
shares of the Company's common stock, $.001 par value per share (the "Common
Stock"), dated as of January 9, 2004, issued by the Company to Goodnow. Goodnow
is the holder (the "Holder") of each of the Debenture and the Warrant.
This letter shall serve as the undersigned Holder's waiver of each of the
following: (x) the conversion limitation specified in Section 6(c)(i) of the
Debenture; and (y) the exercise limitation specified in Section 1(d)(i) of the
Warrant. Accordingly, on and after the 61st day after the date of this notice,
Goodnow shall be entitled to do the following: (a) to convert all or any portion
of the principal and accrued interest on the Debenture into shares of Common
Stock at the applicable Conversion Price (as defined in the Debenture); and (b)
to exercise the Warrant at the applicable Warrant Price (as defined in the
Warrant), in each case subject to the terms and conditions of the Debenture and
the Warrant, as the case may be, including without limitation, Section 6(c)(ii)
of the Debenture and Section 1(d)(ii) of the Warrant. This waiver is given in
accordance with Sections 6(c)(i) and 11 of the Debenture and Sections 1(d)(i)
and 9 of the Warrant.
Please acknowledge your confirmation of this waiver by countersigning and
returning an original of this letter to the undersigned.
[The signature page follows.]
GOODNOW CAPITAL, L.L.C.
By: Xmark Asset Management, LLC,
Manager
By: /s/ Mitchell D. Kaye
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Name: Mitchell D. Kaye
Title: Chief Investment Officer and Managing Member
cc: Alexander M. Donaldson, Esq.
Steven E. Siesser, Esq.
Confirmed as of
January 22, 2004 by:
INCARA PHARMACEUTICALS CORPORATION
By: /s/ Richard W. Reichow
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Name: Richard W. Reichow
Title: Executive V.P. & CFO