March __, 1998
SPECIAL MEETING OF STOCKHOLDERS
OF CORTECH, INC. ("Cortech" or "the Company")
ASSET VALUE FUND LIMITED PARTNERSHIP ("Asset Value (1)")
(a Delaware limited partnership)
This Proxy Statement and the enclosed white proxy card are being sent by
Asset Value on or about March *, 1998 in connection with its solicitation of
proxies at the Special Meeting being held by Cortech at ****Denver time, April
__, 1998 at ***************** ( the "Meeting"). At the Meeting, Cortech proposes
(1) to merge with BioStar, Inc. ("BioStar"), a company located in Boulder,
Colorado, which is losing money and has an accumulated deficit of more than
($25,000,000) (the "Merger") and (2) to reverse split Cortech's outstanding
shares of common stock ("Cortech Shares") * for * (the "Reverse Stock Split").
Asset Value, Cortech's largest stockholder, opposes the Merger but is in
favor of the Reverse Stock Split. Also at the Meeting, Asset Value proposes that
Cortech's By-laws be amended to eliminate the poison pill now in effect and to
prevent the establishment of another poison pill absent approval by a majority
of Cortech Shares.
In reliance upon Rule 14a-5(c) of the Securities and Exchange Act of
1934(2), reference is made to the proxy statement dated March *, 1998 which is
being sent to you by the Company for a full description of management's
proposals, as well as information with respect to the number of shares eligible
to vote at the Meeting, the quorum, the record date, the securities ownership of
the Company, information about the Company's officers and directors, including
compensation and the same information about BioStar and its officers and
directors.
- ----------------
(1) Asset Value is a Delaware limited partnership which is wholly-owned by
Kent Financial Services, Inc., a Delaware corporation ("Kent") the shares of
which are publicly traded on NASDAQ under the symbol KENT. Additional
information about Asset Value and its management and about Kent and the names of
its officers, directors and controlling stockholders and their ownership
interests is presented on Schedule 1 of this Proxy Statement.
(2) Rule 14a-5(c) provides that "any information contained in any other
proxy soliciting material which has been furnished to each person solicited in
connection with the same meeting or subject matter may be omitted from the proxy
statement, if a clear reference is made to the particular document containing
such information."
<PAGE>
PLEASE READ THE FOLLOWING MATERIAL AS WELL AS
---------------------------------------------
MANAGEMENT'S PROXY STATEMENT WITH CARE.
---------------------------------------
PROPOSAL 1
OPPOSITION TO THE MERGER
In this Proxy Statement we propose that Cortech's Merger with BioStar be
rejected because in our view:
(1) the terms of the Merger do not maximize Cortech's value and in fact
the terms are unfair to Cortech's public stockholders and
(2) the Board misstates that liquidation is the only alternative to
the Merger when in fact, if the poison pill were not in place, we believe that
Cortech would have had and could still have numerous suitors better able to use
Cortech's cash and tax operating loss carryforwards ("NOLs").
To encourage potential suitors besides BioStar, Asset Value is also
proposing that Cortech's By-laws be amended to remove the poison pill (See
Proposal 2 - Removal of the Poison Pill). If the poison pill is eliminated,
Asset Value or any other investor could buy up to 100% of Cortech Shares and
could then effect a change in control of Cortech. Asset Value has declared its
current intention to seek the election of its nominees to Cortech's Board at the
upcoming annual meeting.
A majority of Cortech Shares voting at the Meeting is required to reject
the Merger or to amend the By-laws to eliminate the poison pill. (See Required
Vote and Manner of Voting). Asset Value is also favoring management's proposal
to amend the Certificate of Incorporation to effect the Reverse Stock Split
which will require the favorable vote of a majority of outstanding Cortech
Shares.
Mirror, Mirror on the Wall, Who's the Fairest of Them All?
----------------------------------------------------------
Kenneth Lynn, CEO of Cortech, and his hand-picked Board would have us
believe that once they determined in April 1997 that Cortech could not succeed
as a stand-alone entity, they scoured the land for a merger partner and the only
prospective suitor was BioStar, a company which lost almost ($2,000,000) in
fiscal 1997 and by the end of 1997 had a negative net worth of ($5,600,000).
BioStar is so poor that without Cortech or another cash source it has only six
months to live. On December 31, 1997, BioStar had cash of $1,281 and had
negative working capital of ($3,100,000). According to Cowen & Company
("Cowen"), Cortech's financial advisor. BioStar's earning prospects are so scant
that one of Cortech's principal assets, approximately $77.2 million in NOLs, are
of little value to BioStar which has its own significant NOLs. Because of this,
we believe that Cortech's NOLs were not a significant factor in determining the
two companies' relative valuation, which we think worked to the detriment of
Cortech and to the benefit of BioStar. The result, in our view, is a Merger that
does not maximize Cortech's stockholder value. So what is it about BioStar that
impressed Mr. Lynn sufficiently to merge it with Cortech when, in our view, the
Cortech stockholders do not gain from the Merger?
<PAGE>
WARNING
In our opinion, several individuals and entities, other then Cortech
stockholders reap the benefits of the merger. We believe that Mr. Lynn stands to
benefit from the Merger because it triggers his golden parachute ($1,300,000 for
him and his management team) and enables him (and other Board members and
executive officers) to exercise 623,535 options. Cortech's regular attorneys,
Cooley Goodward LLP ("Cooley"), stand to gain, in our view, because they are
representing BioStar in the Merger and will remain counsel to the combined
entity. Cowen, Cortech's purportedly independent advisor, will benefit because
its fee of $250,000 soars to $400,000, an increase of 60%, only if the Merger is
consummated. BioStar's management receives additional compensation and options
in connection with the Merger and BioStar's Board receives favorable treatment
in the vesting and exercise of its options. In fact, it seems to Asset Value,
that every participant will profit from the Merger except the public
stockholders of Cortech, who will suffer a dilution in book value per Cortech
share of 64% (from an historical $.83 to a pro forma $.30) while BioStar
stockholders will enjoy an improvement in book value from an historical negative
($2.86) to a positive $.17 per share.
We have read carefully the Joint Proxy Statement/Prospectus provided by
Cortech and BioStar, including Cowen's so called fairness opinion. We ask the
Cortech Board:
"PLEASE DISCLOSE WHAT YOU SEE IN THE HISTORY AND FINANCIAL
STATEMENTS OF BIOSTAR THAT CHANGES IT FROM WHAT IS (IN OUR VIEW) AN
UGLY DUCKLING INTO A BEAUTIFUL SWAN"
BIOSTAR: RISING STAR OR BLACK HOLE
----------------------------------
It is not that we object to the Merger because we think that Cortech has
been a glittering star. On the contrary, Cortech's management, in our opinion,
exercised poor judgment in not aggressively downsizing to preserve cash as the
failure to commercialize Cortech's technology became evident. But look at what
we see as the dark side of BioStar (and this list does not purport by any means
to be complete):
. BioStar lost almost ($2 million) in fiscal 1997, has never had earnings
in any year and projects no earnings for the immediate future.
. BioStar has an accumulated deficit of over ($25 million) and a negative
net worth of more than ($5.6 million).
. BioStar has short and long term debt totaling over $9.4 million.
. BioStar's cash flow has been almost totally dependent on third party
funding, and even with Cortech's cash, BioStar has no more than two
years to live without additional funding.
<PAGE>
RUSH TO JUDGMENT
The Cortech Board states that after spending most of 1997 evaluating the
merits of potential strategic transactions, the Board concluded that BioStar is
the best Cortech can do and that Cortech's only alternative to BioStar is
liquidation. In reality, we believe that the Board has no basis for its
conclusion that Cortech is such a wallflower. In our opinion, the Board never
took even one step that could have seriously exposed Cortech to the marketplace.
It did not eliminate the poison pill; it did not engage an investment banker;
and it did not advertise that Cortech was up for bid. Here are other facts
which, in our view, make the Board's contentions not credible:
1. Cortech's management failed to elect Asset Value's representative to the
Board so that he could participate in the process of ferreting other possible
deals, even though Lynn conceded that he knew that Asset Value's representative
was a "shrewd investor."
2. Cortech only engaged an investment banker after the terms of the Merger
had been set.
3. The Cortech Board did not request that Cowen solicit other parties who
might be interested in a deal for Cortech, and actually discouraged Cowen from
considering other potential suitors by making a significant portion of Cowen's
fee dependent upon the success of this Merger.
In evaluating the truthfulness of the purported reasons for the Board's
support of the Merger, we ask that you consider these facts:
. Cortech says that it was aggressively pursuing strategic alternatives
during most of 1997. BioStar says that it had been seeking a deal since
February of 1997. BioStar operates within miles of Cortech and both
companies are represented by the same law firm. IT IS NOT CREDIBLE TO US
THAT CORTECH WAS UNAWARE OF BIOSTAR UNTIL OCTOBER OF 1997.
. What made the money losing BioStar suddenly appear attractive to Cortech,
one of whose principal assets were significant NOLs? In our view the
answer is simple and obvious. Paul Koether of Asset Value met with
Lynn on October 22, 1997, and on October 23, 1997, Lynn was "introduced"
to the CEO of BioStar by Cooley, their mutual regular counsel.
THE FOX IN THE CHICKEN COOP
Lynn proceeded to negotiate the terms of the Merger without benefit of the
presence of its special counsel, a non-management Board member or an investment
banker, although he purportedly kept them informed. Meanwhile we believe that
BioStar benefitted in the negotiations by the presence of its investment
banker, Lehman Brothers, Inc., and its counsel, Cooley, which as we have already
noted was the regular counsel of Cortech and presumably continued to be an
attorney trusted by Lynn.
<PAGE>
In our view, given the benefits they will receive, none of the Cortech
officers and directors are independent in this transaction; of all of them,
however, we believe that the least independent and the most conflicted is Lynn,
the very individual who was entrusted by the Board to negotiate the terms of the
Merger.
WOULD THE GODS GIVE US THE GIFT TO SEE OURSELVES
------------------------------------------------
AS OTHERS SEE US(3)
------------------
Lynn has described himself in this transaction as a "fiduciary". Far from
it in our view. Prior to the Merger, Lynn owned Cortech Shares worth less than
$2,000 in the marketplace. As a result of the Merger, Lynn and his management
team will receive: (1) payments of $1,300,000; (2) payment of premiums for
health benefits for eighteen months; and (3) the immediate vesting of 623,535
options. Mr. Lynn will also continue as a director of the successor corporation
after the Merger.
We believe that Mr. Lynn negotiated the terms of the Merger with apparent
disregard for stockholders' interests much like, in our view, he has ignored the
growing disparity over the past several years between his interests and the
public stockholders' interests. The chart below reflects the difference between
Mr. Lynn's increasing compensation between 1993 and 1997 and the concomitant
decline of the market value of Cortech Shares.
<TABLE>
<CAPTION>
GRAPH OF CORTECH'S HIGH STOCK PRICE AND LYNN'S
COMPENSATION.
1993 1994 1995 1996 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Cortech's High Stock Price $18.25 $14.25 $3.65625 $3.8125 $2.03125
Lynn's Compensation $140,000 $181,744 $305,499 $330,006 $330,513
</TABLE>
NOT A PRETTY PICTURE!
------------------
(3) An anglicized version of a quotation from the poem "To a Louse" by
Scottish poet Robert Burns.
<PAGE>
But the rejection of the Merger alone will not get Lynn out of the picture.
That is why we are proposing amendments to Cortech's By-laws to eliminate the
poison pill so that potential investors or strategic partners may be encouraged
to purchase additional Cortech Shares and eventuate a change in control. Asset
Value has stated and restates here that it has no potential merger partner in
mind and will not merge Cortech with an Asset Value affiliate. Asset Value
believes it stands to gain from any future acquisition or Merger involving
Cortech only to the extent all stockholders benefit. We ask you to join us and
VOTE NO TO THE MERGER!
If You Have Supported Management, Now Is the Time To Change Your Mind
---------------------------------------------------------------------
Even if you have executed management's ***** proxy card, you can change
your vote by signing, dating and returning the enclosed white proxy card in the
postage paid envelope provided. Any proxy, including one we hold, can be revoked
(see "Revocation of Proxies").
PROPOSAL 2
REMOVAL OF THE POISON PILL
Whatever the purported justification for establishing a poison pill in
general, in this case we believe it has served only to prevent competition for
the control of Cortech. Once the Board determined to transfer control, in our
opinion, the Board should have removed the pill and permitted unfettered
purchases of Cortech Shares. In fact, Asset Value asked the Cortech Board to
remove the pill so that Asset Value or any other potential investor could
purchase more than 15% of the outstanding Cortech Shares. Such a step might have
induced another suitor or enabled the Company to secure better terms in the
Merger by increasing the market value of Cortech Shares. Instead, we believe the
Board has used the pill to insulate the Company from any suitors other than
BioStar in a Merger which we believe serves management's interests rather than
the maximization of stockholder values.
"WHO CARES WHAT OWNERS THINK? Who owns American companies? The
management, of course. Shareholders are tolerated, but managers rule.(4)"
- -----------------
(4) Market Watch, New York Times, 3/8/98, Floyd Norris. This quote has been
made without the permission of the New York Times or Mr. Norris.
<PAGE>
Not once has a director or officer of Cortech sought the advice or opinion
of Asset Value, Cortech's largest stockholder, about the Merger. Not once did a
Cortech director or officer seek the cooperation of Asset Value to avoid, what
in our view, is the senseless costs of this ill-fated merger proposal even after
Asset Value expressed its opposition in a letter to Mr. Lynn.
There can be no justification for the expenditure of approximately
$3,000,000 (20% of Cortech's net worth) on what we believe is a self-serving
merger, without consulting Asset Value, who, in our view, represents the
position of the public stockholders. Unfortunately, no matter what the outcome,
we the stockholders will pay the costs of what we consider the sheer arrogance
of Cortech's management and directors.
THIS BOARD ACTS LIKE THEIR VOICE IS THE ONLY CHOICE.
But we stockholders can demonstrate that they are wrong. We urge you to
join us in voting against the Merger and for the removal of the poison pill.
PROPOSAL 3
THE REVERSE STOCK SPLIT
Asset Value favors the Reverse Stock Split because it may enable Cortech to
retain its NASDAQ listing. In fact, Asset Value believes that Cortech's Board
was negligent in not taking this step sooner.
VOTE NO TO THE MERGER
VOTE YES TO REMOVE THE POISON PILL
VOTE YES TO THE REVERSE STOCK SPLIT
<PAGE>
REQUIRED VOTE AND MANNER OF VOTING
----------------------------------
If more than a majority of Cortech Shares present by proxy or in person
vote against the Merger and in favor of amending the By-laws to eliminate the
Poison Pill, the Merger will be rejected and the Poison Pill will be eliminated.
If more than a majority of outstanding Cortech Shares vote for the Reverse Stock
Split, this proposal will be approved. Valid proxies will be voted as instructed
therein, but absent instructions on the white proxy card, will be voted AGAINST
the Merger and FOR the removal of Poison Pill and FOR the Reverse Stock Split
and in the discretion of the proxies on any other matter that comes before the
Meeting which was not known a reasonable time before the Meeting. Abstentions
and broker non-votes (where a nominee holding shares for a beneficial owner has
not received voting instructions from the beneficial owner on a particular
matter and the nominee does not vote the shares) will be counted in the
determination of a quorum but will not be counted for or against any proposal.
We urge you to sign, date and return the white proxy card in the enclosed
envelope. No postage is required if mailed in the United States.
SHARES IN STREET NAME
If you hold your Cortech Shares in the name of a brokerage firm or bank,
your broker or banker cannot vote the Shares until the broker or banker receives
specific instructions from you. Please contact the party at the brokerage firm
or bank responsible for your account to make sure that a proxy is executed for
your Cortech Shares on the white proxy card.
REVOCATION OF PROXIES
If you have executed management's **** proxy card before receiving this
Proxy Statement, you have every right to change your vote by signing, dating and
returning the enclosed white proxy card in the postage-paid envelope provided.
Only your latest dated proxy will count at the Meeting. Any proxy, including the
proxy solicited hereby, may be revoked at any time before it is voted by (i)
submitting a duly executed proxy bearing a later date to the Secretary of the
Company or to Asset Value, (ii) filing with the Secretary of the Company a
written revocation or (iii) attending and voting at the Meeting in person.
<PAGE>
SOLICITATION EXPENSE
Asset Value, Mark W. Jaindl and Frederick J. Jaindl (see Schedule 1) will
bear the cost of preparing, assembling and mailing the enclosed form of proxy,
this proxy statement and other material which may be sent to stockholders in
connection with this solicitation. Officers and regular employees of Asset Value
or its affiliates may solicit proxies by mail, telephone, telegraph and personal
interview, for which no additional compensation will be paid. In addition, Asset
Value has retained Beacon Hill Partners, Inc. to solicit proxies on its behalf.
It is anticipated that the cost to Asset Value in connection with this
solicitation will be approximately $50,000, including approximately $15,000
payable to Beacon Hill Partners, Inc.
Very truly yours,
/s/ Paul O. Koether
--------------------------
Paul O. Koether
Asset Value Fund Limited Partnership
<PAGE>
IMPORTANT
If your shares are held in "Street Name" only your bank or broker can vote
your shares, and only upon receipt of your specific instructions. Please contact
the person responsible for your account and instruct them to execute a white
proxy card as soon as possible.
If you have any questions or need further assistance in voting, please call
John W. Galuchie, Jr., of Asset Value Fund Limited Partnership collect at (908)
234-1881, or our proxy solicitor:
BEACON HILL PARTNERS, INC.
90 BROAD STREET
NEW YORK, NEW YORK 10004
(800) 253-3814
<PAGE>
SCHEDULE 1
ADDITIONAL INFORMATION ABOUT ASSET VALUE FUND LIMITED
PARTNERSHIP, MARK W. JAINDL AND FREDERICK J. JAINDL
Asset Value Fund Limited Partnership ("Asset Value") is engaged in
investing in securities. The sole general partner of Asset Value is Asset Value
Management, Inc. ("Asset Value Management"). Asset Value Management is a
wholly-owned subsidiary of Kent Financial Services, Inc. ("Kent"), whose
principal business is the operation of T.R. Winston & Company, Inc. ("TRW"), its
wholly-owned subsidiary. TRW is a securities broker-dealer registered with the
National Association of Securities Dealers, Inc. Asset Value, Asset Value
Management, Kent and TRW maintain offices at 376 Main Street, Bedminster, New
Jersey 07921.
Mark W. Jaindl ("Mark Jaindl") is the President and Chief Executive Officer
of the American Bank of the Lehigh Valley, a commercial bank whose principal
business address is 4029 West Tilghman Street, Allentown, PA 18104 ("American
Bank"). Mark Jaindl is a director of Pure World, Inc., which may be an affiliate
of Asset Value by virtue of the common stock ownership of Kent and Pure World,
Inc. by Paul O. Koether. Frederick J. Jaindl ("Fred Jaindl") is the sole
proprietor of Jaindl Farms (turkey farming), whose principal business address is
3150 Coffeetown Road, Orefield, PA 18069. Fred Jaindl is Chairman of American
Bank. Mark and Fred Jaindl are the principal stockholders of American Bank. Mark
Jaindl is the son of Fred Jaindl.
As of March 23, 1998 Asset Value holds 2,000,000 Cortech Shares or
approximately 10.80% of the total Cortech Shares outstanding. Mark Jaindl holds
250,000 Cortech Shares, or approximately 1.35% and Fred Jaindl holds 520,000
Cortech Shares or approximately 2.80%. Asset Value, Mark Jaindl and Fred Jaindl
disclaim the beneficial ownership of each other's Cortech Shares. Purchases and
sales of Cortech Shares by Asset Value, Mark Jaindl and Fred Jaindl are listed
on Schedule 2.
During the past ten years, none of Asset Value, Mark Jaindl, Fred Jaindl,
Asset Value Management, Kent, TRW, or the Directors and Executive Officers of
Kent has been convicted in a criminal proceeding.
<PAGE>
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS
OF KENT FINANCIAL SERVICES, INC.
Percent of Direct or
Indirect Ownership
Name and Address Position and Office of Voting Securities of
of Beneficial Owner Currently Held Kent Financial Services, Inc.
- ------------------- ------------------- -----------------------------
<S> <C> <C>
Paul O. Koether Chairman, Director 44.90%
211 Pennbrook Road and President
Far Hills, NJ 07931
John W. Galuchie, Jr. Vice President and
376 Main Street Treasurer 2.32%
Bedminster, NJ 07921
Mark Koscinski Vice President *
376 Main Street
Bedminster, NJ 07921
M. Michael Witte Director 1.15%
1120 Granville Avenue
Suite 102
Los Angeles, CA 90049
Casey K. Tjang Director *
56 Hall Drive
Clark, NJ 07066
Mathew E. Hoffman Director *
62 Rosehill Avenue
New Rochelle, NY 10804
_________________________________________
*Less than 1 percent
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 2
PURCHASES AND SALES OF CORTECH SHARES
ASSET VALUE<F1>
Dates purchased Number of shares purchased Price per share<F2> Total
- --------------- -------------------------- ------------------ -------------
<S> <C> <C> <C>
07/25/97 20,000 $ .61375 $ 12,275.00
07/31/97 6,700 .625 4,321.50
08/06/97 9,100 .6875 6,256.25
08/07/97 2,600 .6875 1,787.50
08/08/97 3,100 .6875 2,131.25
08/12/97 458,500 .6875 315,218.75
08/15/97 5,100 .6875 3,506.25
08/18/97 5,200 .6689 3,478.28
08/19/97 3,200 .65625 2,100.00
08/20/97 9,000 .65625 5,906.25
08/21/97 8,500 .6875 5,843.75
08/27/97 146,800 .6875 103,861.00
09/08/97 22,000 .6875 15,125.00
09/11/97 20,000 .703125 14,062.50
09/15/97 26,000 .703125 18,281.25
09/16/97 7,700 .703125 5,414.06
09/17/97 4,000 .703125 2,812.50
09/24/97 31,425 .703125 22,095.70
09/30/97 89,600 .703125 63,000.00
10/01/97 56,000 .703125 39,375.00
10/02/97 1,475 .703125 1,037.11
10/06/97 25,000 .6875 17,187.50
10/07/97 2,000 .6875 1,375.00
10/07/97 6,500 .71875 4,671.88
10/07/97 336,000 .703125 236,250.00
10/08/97 1,556,757 .65 1,011,892.05
10/08/97 5,000 .75 3,750.00
10/08/97 20,000 .71875 14,375.00
10/09/97 2,000 .71875 1,437.50
10/09/97 5,000 .765625 3,828.13
10/09/97 18,500 .75 13,875.00
10/10/97 4,500 .78125 3,515.63
10/14/97 1,000 .78125 781.25
10/14/97 6,000 .8125 4,875.00
10/28/97 15,000 .6875 10,312.50
10/30/97 13,000 .6875 8,937.50
10/30/97 12,000 .65625 7,875.00
11/03/97 3,700 .6875 2,543.75
11/04/97 4,900 .65625 3,215.63
11/05/97 12,000 .6875 8,250.00
11/05/97 2,500 .65625 1,640.63
11/07/97 11,300 .65625 7,415.63
11/10/97 58,343 .65625 38,287.59
11/11/97 10,500 .65625 6,890.63
(table continued on next page)
<PAGE>
(table continued from previous page)
Dates purchased Number of shares purchased Price per share<F2> Total
- --------------- -------------------------- ------------------ -------------
11/14/97 4,000 .65625 2,625.00
11/14/97 8,500 .6875 5,843.75
11/17/97 9,700 .65625 6,365.63
11/18/97 11,300 .65625 7,415.63
11/24/97 5,000 .640625 3,203.13
--------- -------------
3,106,000 $2,086,524.84
--------- -------------
Dates sold Number of shares sold Price per share<F2> Total
- ---------- --------------------- ------------------ -------------
08/13/97 3,000 $ .6875 $ 2,062.43
08/29/97 3,000 .71875 2,156.17
09/17/97 2,000 .71875 1,437.45
09/30/97 3,000 .71875 2,156.17
10/07/97 325,000 .65 211,242.95
02/10/98 770,000 .6705 516,285.00
--------- -------------
1,106,000 735,340.17<F3>
--------- -------------
2,000,000 $1,319,425.00
========= =============
MARK W. JAINDL
- --------------
Dates purchased Number of shares purchased Price per share<F2> Total
- --------------- -------------------------- ------------------ -------------
02/10/98 250,000 .6705 $ 167,625.00
========== =============
FREDERICK J. JAINDL
- -------------------
Dates purchased Number of shares purchased Price per share<F2> Total
- --------------- -------------------------- ------------------ -------------
02/10/98 520,000 .6705 $ 348,660.00
========== =============
<FN>
<F1> Excludes the purchase for an aggregate amount of $11,251.52 on October
8, 1997 of warrants to purchase 562,576 shares of Cortech stock, which were
contributed back to the capital of Cortech on October 18, 1997. No shares were
purchased with or are being held with borrowed funds.
<F2> Price excludes brokerage commissions, if any.
<F3> Reflects loss on sale of $31,759.67.
</FN>
</TABLE>
<PAGE>
PRELIMINARY PROXY CARD
Cortech, Inc.
Special Meeting To Be Held On [date], 1998
This Proxy Is Being Solicited On Behalf
Of Asset Value Fund Limited Partnership ("Asset Value")
The undersigned hereby appoints Paul O. Koether, Mark W. Jaindl and John W.
Galuchie, Jr. or either of them, the undersigned's proxies, each with full power
of substitution, to vote all Shares of Common Stock of Cortech, Inc. (the
"Company") which the undersigned would be entitled to vote if personally present
at the Special Meeting of Stockholders of the Company to be held on [date], 1998
at **A.M. at ************************************** (the "Meeting") and at any
adjournments or postponements thereof and, without limiting the generality of
the power hereby conferred, the proxy nominees named above and each of them are
specifically directed to vote as indicated below.
WHERE A CHOICE IS INDICATED, THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED AS SPECIFIED. IF NO CHOICE IS INDICATED, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED AGAINST THE MERGER, FOR THE PROPOSAL TO REMOVE THE POISON
PILL AND FOR THE PROPOSAL TO APPROVE THE REVERSE STOCK SPLIT.
If there are amendments or variations to the matters proposed at the
Meeting or at any adjournments or postponements thereof, or if any other
business properly comes before the Meeting, this proxy confers discretionary
authority on the proxy nominees named herein and each of them to vote on such
amendments, variations or other business.
ASSET VALUE RECOMMENDS A VOTE AGAINST THE MERGER
1. To approve the merger of Cortech, Inc. and BioStar, Inc.
_____FOR _____AGAINST _____ABSTAIN
ASSET VALUE RECOMMENDS A VOTE FOR THE REMOVAL OF THE POISON PILL
2. To amend the Company's By-laws to remove the poison pill.
_____FOR _____AGAINST _____ABSTAIN
ASSET VALUE RECOMMENDS A VOTE FOR THE REVERSE STOCK SPLIT
3. To approve the Reverse Stock Split by amending the Certificate of
Incorporation.
_____FOR _____AGAINST _____ABSTAIN
4. In their discretion, on such other matters as may properly come before the
special meeting or any postponements or adjournments thereof.
The undersigned acknowledges receipt of the accompanying Notice of Annual
Meeting of Stockholders and Proxy Statement for the _________________, 1998
meeting.
Dated: _________________________________, 1998
______________________________________________
Signature of Stockholder
______________________________________________
Signature of Stockholder if Shares held in more
than one name (Please sign exactly as name or
names appear hereon. Full title of one signing
in representative capacity should be clearly
designated after signature. If a corporation,
please sign in full corporate name by President
or other authorized officer(s). If a partner-
ship, please sign in partnership name by
authorized person. If stock is in the name of
two or more persons, each should sign. Joint
owners should each sign. Names of all joint
holders should be written even if signed by only
one.)
ASSET VALUE RECOMMENDS A VOTE AGAINST PROPOSAL 1 AND FOR PROPOSALS 2 AND 3.
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
ASSET VALUE FUND LIMITED PARTNERSHIP
376 MAIN STREET, P.O. BOX 74
BEDMINSTER, NJ 07921
(908) 234-1881
March __, 1998
Dear Fellow Cortech Stockholder:
We and two other investors ("Asset Value") own approximately 15% of the
outstanding shares of Cortech, Inc. ("Cortech"), which makes us by far Cortech's
largest stockholder. At the upcoming Special Meeting, Cortech proposes, among
other things, to merge with BioStar, Inc. ("BioStar"), a company located in
Boulder, Colorado, which is losing money and has an accumulated deficit of more
than ($25,000,000) (the "Merger"). We oppose the Merger because in our view:
(1) the terms of the Merger do not maximize Cortech's value and in fact the
terms are unfair to Cortech's public stockholders, and
(2) the Cortech Board misstates that liquidation is the only alternative to
the Merger when in fact if the poison pill were not in place, we believe that
Cortech would have had and still could have numerous suitors better placed to
use Cortech's cash and tax operating loss carryforwards ("NOLs").
We have read carefully the Joint Proxy Statement/Prospectus provided by
Cortech and BioStar, including the so called fairness opinion of its financial
adviser, Cowen & Company ("Cowen"). We ask the Cortech Board:
"PLEASE DISCLOSE WHAT YOU SEE IN THE HISTORY AND FINANCIAL
STATEMENTS OF BIOSTAR THAT CHANGES FROM WHAT IS (IN OUR VIEW)
AN UGLY DUCKLING INTO A BEAUTIFUL SWAN"
Kenneth Lynn, CEO of Cortech and his hand-picked Board would have us
believe that once they determined in April 1997 that Cortech could not succeed
as a stand-alone entity, they scoured the land for a merger partner and the only
prospective suitor was BioStar, a company which lost almost ($2,000,000) in
fiscal 1997 and by the end of 1997 had a negative net worth of ($5,600,000).
BioStar is so poor that without Cortech or another cash source, it has only six
months to live. At its fiscal year-end, BioStar lost $1,281 and had negative
working capital of ($3,100,000). According to Cowen, BioStar's earning prospects
are so scant that we believe one of Cortech's principal assets, approximately
$77.2 million in NOLs, are of little value to BioStar because it has its own
significant NOLs. The result, in our view, is a Merger that does not maximize
Cortech's stockholder value. So what is it about BioStar that impressed Mr. Lynn
sufficiently to merge it with Cortech when, in our view, the Cortech
stockholders do not gain from the Merger?
WARNING
In our opinion, several individuals and entities, other than Cortech
stockholders, reap the benefits of the Merger. We believe that Mr. Lynn stands
to benefit from the Merger because it triggers his golden parachute ($1,300,000
for him and his management team) and enables him (and other Board members and
executive officers) to exercise 623,535 options. Cortech's regular
<PAGE>
attorneys, Cooley Goodward LLP, stand to gain, in our view, because they are
representing BioStar in the Merger and will remain counsel to the combined
entity. Cowen, Cortech's purportedly independent advisor, will benefit because
its fee of $250,000 soars to $400,000, an increase of 60%, if the Merger is
consummated. BioStar's management receives additional compensation and options
in connection with the Merger and BioStar's Board receives favorable treatment
in the vesting and exercise of its options. In fact, it seems to Asset Value,
that every participant will profit from the Merger except the public
stockholders of Cortech who will suffer a dilution in book value per Cortech
share of 64% (from an historical $.83 to a pro forma $.30) while BioStar
stockholders will enjoy an improvement in book value from an historical negative
($2.86) to a positive $.17.
WOULD THE GODS GIVE US THE GIFT TO SEE OURSELVES AS OTHERS SEE US(1)
-----------------------------------------------------------------
Lynn has described himself in this transaction as a "fiduciary". Far from
it in our view. Prior to the merger, Lynn owned Cortech Shares worth less than
$2,000 in the marketplace. As a result of the Merger, Lynn and his management
team will receive: (1) payments of $1,300,000; (2) payment of premiums for
health benefits for eighteen months; and (3) the immediate vesting of 623,535
options. Mr. Lynn will also continue as a director of the successor corporation
after the Merger.
We believe that Mr. Lynn negotiated the terms of the Merger with apparent
disregard for stockholders' interests much like, in our view, he has ignored the
growing disparity over the past several years between his interests and the
public stockholders' interests. The chart below reflects the difference between
Mr. Lynn's increasing compensation between 1993 and 1997 and the concomitant
decline of the market value of Cortech Shares.
<TABLE>
<CAPTION>
GRAPH OF CORTECH'S HIGH STOCK PRICE AND LYNN'S
COMPENSATION.
1993 1994 1995 1996 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Cortech's High Stock Price $18.25 $14.25 $3.65625 $3.8125 $2.03125
Lynn's Compensation $140,000 $181,744 $305,499 $330,006 $330,513
</TABLE>
NOT A PRETTY PICTURE!
- ------------------
(1) An anglicized version of a quotation from the poem "To a Louse" by
Scottish poet Robert Burns.
<PAGE>
When Asset Value acquired its interest in Cortech in September 1997, we
asked the Cortech Board to elect a nominee of Asset Value to the Board (only one
on a five member Board). The Cortech Board, in effect, refused, then the
Directors approved a transaction which, in our view, will negatively affect all
stockholders. They did this without bothering to ask for, or permit, the
participation of Cortech's largest stockholder, Asset Value, whose interests,
clearly, in our opinion, are more matched with public stockholders than a Board
which collectively owns less than 2-1/2 % of Cortech Shares.
"WHO CARES WHAT OWNERS THINK? Who owns American companies?
The management, of course. Shareholders are tolerated, but managers rule.(2)"
There can be no justification for the expenditure of approximately
$3,000,000 (20% of Cortech's net worth) on what we believe is a self-serving
merger, without consulting with Asset Value, who, in our view, represents the
position of the public stockholders. Unfortunately, no matter what the outcome
we stockholders will pay the costs of what we consider the sheer arrogance of
Cortech's management and directors.
THIS BOARD ACTS LIKE THEIR VOICE IS THE ONLY CHOICE.
But we stockholders can demonstrate that they are wrong. We urge you to
read our enclosed Proxy Statement and join us in voting AGAINST the Merger and
FOR the removal of the Poison Pill. We also recommend voting FOR the Reverse
Stock Split.
Sincerely,
/s/ Paul O. Koether
-------------------------
Paul O. Koether
Asset Value Fund Limited Partnership
VOTE NO TO THE MERGER
VOTE YES TO REMOVE THE POISON PILL
VOTE YES FOR THE REVERSE STOCK SPLIT
- -------------
(2) Market Watch, New York Times 3/8/98, Floyd Norris. This quote has been
made without the permission of the New York Times or Mr. Norris.
<PAGE>
IMPORTANT
If your shares are held in "Street Name" only your bank or broker can vote
your shares, and only upon receipt of your specific instructions. Please contact
the person responsible for your account and instruct them to execute a white
proxy card as soon as possible.
If you have any questions or need further assistance in voting, please call
John W. Galuchie, Jr., of Asset Value Fund Limited Partnership collect at (908)
234-1881, or our proxy solicitor:
BEACON HILL PARTNERS, INC.
90 BROAD STREET
NEW YORK, NEW YORK 10004
(800) 253-3814
